The recent decrease in the price of silver by 2.6% to $26.4 per ounce since Tuesday highlights a significant shift in momentum. Following a failed attempt to surpass the $30 per ounce mark on 7 April, silver has been experiencing sideways consolidation without any substantial rebounds. This decline is not simply a minor setback, but rather a crucial indicator for technical analysis. The sharp drop below the $27 level signifies a break beyond the corrective pattern, with the price falling below the 61.8% retracement of its rise since late February. The upcoming days will reveal whether the former local resistance around the 25.0-25.5 range will now act as a support level. Failure to do so may lead to a series of negative scenarios.
On the daily timeframes, a reversal pattern known as the “head and shoulders” has emerged, with the price declining below the “neckline.” If this pattern comes to fruition, it could trigger a pullback to $24.4 per ounce. However, such a move may only embolden the bears in the market. It is essential to note that this is not the first time since 2020 that silver has attempted to breach the $30 mark. The resilience of resistance at this level could deter buyers, especially considering the lack of a breakout similar to that witnessed in gold.
Looking ahead, the 200-week moving average has historically served as a crucial support level for silver, preventing prices from plunging significantly lower for extended periods. If this pattern continues, the intensity of the sell-off may diminish once prices fall below $23. However, there are precedents suggesting that silver could dip even further below this curve. For instance, in 2022, silver briefly dropped 10% below the 200-week moving average, hinting at a potential decline to $21.3. In more extreme cases, a massive sell-off in silver positions could occur if prices dip below this moving average, as witnessed in 2020 and 2013 when silver plummeted over 30% below the curve.
The recent decline in the price of silver raises concerns about its future trajectory on the market. Traders and investors should closely monitor key support and resistance levels, as well as emerging technical patterns, to make informed decisions in the face of market uncertainty.
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