- Silver surged roughly 5% on Wednesday, testing the key $54 resistance zone last seen at a major swing high.
- Despite strong price action, weakening volume raises red flags.
- A close above $54 signals breakout potential, but risks remain elevated near $50 support.
Silver has screamed to the upside during the trading session on Wednesday as the bubble continues. Interestingly, we are testing the $54 level, an area that was the swing high with a ton of volume that then ended up being very negative. Now that we are back up here, when you look at the volume, it is about half of what we had seen in that area. So, while this is obviously a very bullish market, this is one red flag that's difficult to ignore.
Wednesday Wasn’t Normal
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Gaining 5% in a single day is not normal behavior, but it seems like traders in futures markets are just throwing markets around in some type of nonsensical panic because oil was down over 4% today. So, at this juncture, I think you have to look at this as a market that we are on the precipice of either making a double top or breaking out to the upside. If we were to turn around and give back $50, I think that would be a horrific sign. Volume is not with the buyers at this point, and that is the one thing that concerns me. On a daily close above $54, then you’ve made a fresh new high, and that’s a classic longer-term signal to go to the upside.
I certainly wouldn’t short this market, at least not right now. But you do have to realize that you are chasing this market 5% higher than it opened during the day. That’s not a subtle move; that is a bit of a panic. But unfortunately, we don’t have the volume to make it truly impressive to me. I still think there’s a lot of danger out there. Silver is a very difficult market to trade under the best of circumstances because it’s thin, and most people who trade silver successfully actually specialize in it. Retail traders, unfortunately, tend to get wiped out in silver before it’s all said and done. However, the $50 level is crucial. The $54 level is crucial. Watch that volume.
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