When investors think of precious metals, it’s usually gold that comes to mind.
That’s why I often refer to silver as the “other” precious metal.
And while gold is the one grabbing all the headlines, I’m more interested in a potentially explosive move in silver right now…
Let’s look at the silver futures chart…
From its March high of $26.16 (red arrow), silver has dropped almost 20% and is currently trading at $21.
That’s a big move and there hasn’t been much of a bounce along the way.
But now, silver is trading into significant technical support and the potential for a large bounce is building up.
There are two indicators on the price chart that suggest silver’s downtrend slide is ending soon.
First, are the Bollinger Bands (blue line). They’re a great tool to identify an overextended market.
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The upper and lower bands contain most of a market’s price action, and prices tend to bounce off those outer bands.
Now, prices are tagging the lower band… setting the stage for a potential reversal.
The second indicator is the 200-period moving average (MA) that’s currently at $20.26.
It’s possible the market will test this MA. But its proximity to the lower Bollinger Band suggests there’ll be a lot of support for silver immediately below.
A good initial sign that the bounce has started will be if prices can close back above the lower band.
Remember, this chart is on a weekly timeframe.
So, I’ll be waiting until the end of the week to see if silver can close back above that lower Bollinger Band.
If it doesn’t, then there’s simply no trade to take and I’ll wait to see if we test the 200-period MA lower down.
Happy trading,
Imre Gams
Analyst, Market Minute
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