The price of silver is attempting to recover higher after last Friday’s highly volatile trading session caused the white metal to dip towards the $27.00 level and then reversed back towards the $28.00 level.
Silver bulls are still at risk as sentiment towards the metal remains extremely high. Elevated bullish sentiment towards silver was a red flag that I mentioned last week, as some 83 percent of traders were bullish towards further gains in silver.
According to the ActivTrader Market Sentiment tool, the bullish sentiment bias towards silver still remains extremely high, as some 82 percent of traders are still predicting further upside for silver.
This one-way sentiment skew continues to warn that a further price dip could still be on its way. The CME future chart is showing that significant volume and interest for silver is seen around the $26.00 level.
Potentially, a price dip under the $27.00 level this week could cause a final shake-out towards the $26.00 price area. The technical shows that the price of silver is likely to remain under pressure while trading under the $28.00 resistance level.
On the fundamental front, the prospects of higher inflation in a low growth environment are extremely bullish for the price of silver. If inflation continues to run hot over the coming quarters I would expect further gains in the price of silver.
Overall, the high level of bullishness towards silver from the retail crowd is worrying, however, retail traders are not always wrong. If silver fails to overcome $28.00 this week I have very real concerns that silver could test towards $26.50 to $26.00 before finally rallying back above $28.00.
Silver short-term Technical Analysis
The short-term technicals for silver show that a bearish breakout from a rising price channel has taken place while the price of silver trades beneath the $28.00 level.
If bulls can move the price back above the $28.00 level I would expect further gains towards $28.50 and possibly $30.00.
Failure to get above the $28.00 level this week and the price of silver could test back towards its key 200-period moving average on the four-hour time frame, around $27.00.
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Silver Medium-term Technical Analysis
The daily time frame shows that a large triangle pattern has formed. A major upside breakout will take place from the triangle pattern if bulls can take out the $29.10 resistance level. The $30.00 and $33.00 levels are valid targets, although $40.00 would be the major target.
Silver’s 200-day moving average is some way away from current levels, at $25.60. It is unlikely silver will retest this key technical metric. Buying dips towards the $27.00 to $26.00 area is probably the best medium-term strategy.
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