- Silver declined sharply on Tuesday before stabilizing near the key $47 level, a long-tested support zone.
- Analysts note that being above $45.50 could sustain consolidation, while a breakdown below that point may trigger a deeper collapse.
Silver fell pretty significantly during the trading session on Tuesday as we continue to see a lot of volatility, but it has seen a bit of a turnaround. It’s interesting because the $47 level is an area that’s been important multiple times and it is, in fact, showing signs of life. The market turning around and showing signs of life does at least suggest that we are a bit sideways at this point, and therefore I think that’s actually a good sign for those who truly enjoy and want to be long in the silver market because, quite frankly, this is a market that has been far too parabolic for a while and then turned around to show signs of collapse.
Area of Inflection in Silver
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Now, the question, of course, is whether that collapse is something that we need to worry about or if it’s something that was just a quick knee-jerk reaction to all the dumb money coming into the market, because that’s when the dumb money came into the market. The $47 level was resistance on the way up and support on the way down. The 50-day EMA sits just above the 50% Fibonacci retracement level near the $45.50 level.
I think that’s where the rubber meets the road. If we were to break down below that level, then I believe silver completely collapses. On the other hand, if we stay in this general vicinity and do so for a while, that’s actually a good sign because it suggests that people are at least comfortable with silver being above $47 an ounce. It’s worth noting that the 50-day EMA being broken was very strong, but we got horribly rejected in that area. Every time we have in the past, $50 has been where you see a lot of people blow up.
Ultimately, I think this is a market where the more time we spend sideways, the better off you’re going to be if you’re bullish. Short-term traders will probably continue to look at this as a back-and-forth opportunity, but below the 50-day EMA, I think things get rather ugly rather quickly.
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