I had mentioned a while back that I don’t want to see silver drop that far (I’d been expecting a test of the SMA 50 per this update last week) but it appears that the big breakout point (2016 high of 21.23) is now the objective. It was always viable, but not preferred if the larger rally was going to continue.
Also note that the SMA 200 is rising toward that level. Silver is famous for losing support and shaking ’em out (look no further than the brutal whipsaw in March).
Here is the weekly chart showing the 2016 high, but with the 200 day average above closer to the next support at 18.88 a drop to that level cannot be ruled out either. The way silver rolls, that would not necessarily negate the bull market. That is a strong support area.
The monthly chart shows that silver did finally fail our original strong resistance area at 26-27.50 as expected. It’s just that true to its nature, it made an impulsive break through it first and lingered for several weeks. That is the area that is equivalent to the HUI target of 375, which has also temporarily repelled the index, as we’ve been prepared for.
Bottom Line
Silver has initial support at 21.23 with the next support level around 18.80 to 18.90.
The drama that silver is putting into its downside needs to be respected by inflation/reflation traders. The upside after all, was even more dramatic than the downside was in March. The inflation/deflation question remains very much up in the air and it should be answered by the Gold/Silver ratio and the reserve currency, the US dollar as they continue to bounce but have not (yet) confirmed anything more than that.
Taking the silver charts at face value, it is technically a buy at 21.23 and a strong buy at 18.90.
