Silver is racing higher today, gaining 4.5% in its largest one-day advance since August 19. Lower US Treasury yields are helping the move, but the technical picture has also turned more bullish after sellers repeatedly failed to keep the price below key support.
The 30-year Treasury yield is down close to 6 basis points and back below 5.00% at 4.944%. The 10-year yield is down 4.6 basis points at 4.681%. Lower yields reduce the opportunity cost of holding non-yielding metals such as silver. A softer US dollar and the pullback in oil are also providing support to the precious-metals complex.
Sellers had their shot below the 50% retracement
Silver has been correcting in an up-and-down fashion since reaching $71.16 at the end of August. During that correction, the price tested and moved below the 50% retracement at $62.92 three separate times this month, including after yesterday’s FOMC decision.
Each time, however, the price quickly reversed back above the level.
That failure is important. Sellers had their shot below the 50% retracement, but they could not keep the price there. When a market repeatedly breaks below a key level and cannot stay below it, sellers can become frustrated. As they cover positions and buyers step back in, the failed break can become the catalyst for a move in the opposite direction.
Today’s rally—helped by the decline in yields—started with a move back above the 100-hour moving average at $63.86. Buyers then pushed above the 61.8% retracement at $63.95 before extending through the next important resistance cluster:
- The 38.2% retracement at $64.85
- The 200-hour moving average at $64.90
Moving above that area gave buyers more control and helped accelerate the upside momentum.
The 100-day moving average is the next target
Silver has traded as high as $66.17 today, leaving the 100-day moving average near $66.75 as the next key target.
That moving average is important because it helps define the broader technical bias. Reaching the level would be one thing. Buyers still need to get above it—and stay above it—to open the door for additional upside momentum.
For now, holding above the $64.85 to $64.90 area keeps the short-term bias tilted more firmly in the buyers’ favor.
What buyers and sellers need to do next
For buyers, the roadmap is straightforward. Stay above the 38.2% retracement at $64.85 and the 200-hour moving average at $64.90, then make a run at the 100-day moving average at $66.75. A sustained move above the 100-day moving average would strengthen the bullish bias and give buyers even more control.
For sellers, the first job is to push the price back below the $64.85 to $64.90 area. That would weaken today’s breakout and put the 61.8% retracement at $63.95 and the 100-hour moving average at $63.86 back in play.
A move below those levels would shift the focus back toward the 50% retracement at $62.92. However, given the repeated failed breaks at that level, sellers would need to get below it—and stay below it—before they could claim more control.
Trading education: A failed break can become the catalyst
In my book Attacking Currency Trends, I emphasize that moving through a technical level is only the first step. The market must also stay through that level to confirm that buyers or sellers are taking control.
Silver is a good example. Sellers broke below the 50% retracement at $62.92, but the price could not stay below it. The reversal back above that level was the first clue that the downside break had failed. The subsequent moves above the 100-hour and 200-hour moving averages provided the confirmation that buyers were taking more control.
The lesson is simple: Do not focus only on the break. Pay attention to what happens after the break. A failure to stay beyond a key level can be just as important—and sometimes more important—than the initial break itself.
The technical roadmap
Silver’s short-term bias is more bullish while the price remains above the $64.85 to $64.90 area. The 100-day moving average at $66.75 is the next major upside test.
A move back below $64.85 would weaken the breakout. A fall below the $63.95 to $63.86 area would give sellers more control and turn the focus back toward $62.92.
The price action around those levels will provide the next clue
This article was written by Greg Michalowski at investinglive.com.