Silver has done really well in recent weeks ascending towards “round number” resistance at $30 but that’s where it “decided to call it a day” on Friday with a big ugly reversal candle forming on heavy volume – a “gravestone doji”. Silver’s strong rally this month has led to its being supercritically overbought on its RSI indicator for most of this month and reaching its second most overbought extreme on its MACD indicator of the past 10 years.
On its 3-month chart below we can also see that its ascent this month has taken it to the top of the uptrend channel shown, a good point to reverse to the downside with the bearish candle that appeared on Friday strongly suggesting that this is what it will do.
As set out in the parallel Gold Market update, the fear factor this month associated with an impending attack on Israel by Iran – which is now happening – appears to have been blown out of proportion, with, at the time of writing, it looking like Iran is lobbing face saving firework-like missiles at Israel, most of which are being shot down.
So if this attack turns out to be a “nothingburger”, markets will heave a sigh of relief next week – and gold and silver will likely react back as the charts are suggesting.
As with gold stocks, this is thought to be a good time to take some profits on silver stocks with a view to buying back any stock sold at a better price a little later or taking the opportunity to rebalance ones portfolio to include the strongest stocks.
We are only talking about a correction here – the powerful PM sector bullmarket should soon reassert itself and take prices much higher. How far might silver react back over the short to medium-term? – probably no lower than about $26.50 before it turns higher again.
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