Silver appears to have found a new balance around the 21.70 area, recovering somewhat from the 4-month low of 19.88 recorded on March 10. This area has been a thorn in the bulls’ side in both the June-July 2022 and November 2022 periods, with an upside breakout eventually taking place.
At this juncture, the silver bulls are facing strong resistance from the trifecta of the 50% Fibonacci retracement of March 8 – September 1 downtrend and the 50- and 100-day simple moving averages (SMAs) at the 22.24-22.30 area.
While the recent moves by both the stochastic oscillator and RSI are sending a bullish message, there are two factors that should potentially worry the bulls in the market. The Average Directional Movement Index (ADX) is signaling a weakening bullish trend, potentially throwing a spanner in the works for the bulls. In addition, the higher high seen in the stochastic oscillator has not been matched with a higher high in the silver price action. This is usually an indication of a bearish divergence developing in the market.
Should the bulls remain confident, their initial target could come at the busy 22.24-22.30 area. Higher, the 61.8% Fibonacci retracement of 23.35 could trouble them, ahead of the key January 3 high of 24.53.
On the other hand, the bears appear to have a clear path until the 20.90-21.13 range set by the – 38.2% Fibonacci retracement and the 200-day SMA. Even lower, the May 13, 2022 low at 20.44 could be an area where the bulls might decide to set up their defense.
To conclude, silver bulls are trying to break above a busy area, but there are increasing signs not favouring them at this juncture.