The price of silver has moved sharply lower after the last few trading sessions due to the massive rise in the US dollar index in the aftermath of the December FOMC policy meeting.
Financial markets have also been reacting to the de-escalation of the situation in Ukraine, which has so far not turned into a major military conflict as many had feared last week.
Seasonality has also been at play. January is usually a good month for silver. Not that some of the initial buying interest is waning as February approaches, silver is starting to lose its bid.
Silver and gold have been a major beneficiary of QE. With the now one-month away from taking away the punchbowl, we are probably seeing some form of adverse reaction from tapering.
Silver had benefit during the recent pullback in cryptos. A price chart shows a notable inverse correlation with precious metals and Bitcoin this year. If Bitcoin bottomed this week, it could be bearish for silver.
According to the ActivTrader Market Sentiment tool retail traders remain on the wrong side of the trade. The bullish sentiment bias remains unchanged with 93 percent of traders still predicting further upside.
I continue to have my concerns about the extreme bullish sentiment. Potentially, bulls are in trouble, and this could just be the start of the downtrend. The technical are also worrying after the recent rejection from the 24.00 level.
Silver short-term Technical Analysis
The short-term technicals for silver show that a massive head and shoulders pattern has formed. It appears silver has formed a final right hand shoulder to complete the bearish pattern.
According to technical analysis silver prices could stage a final move towards the $21.00 level over the coming days. A break under this area could cause price collapse towards the $16.00 level.
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Silver Medium-term Technical Analysis
The daily time frame show that the shiny metal has formed a large wedge pattern, which holds a massive downside price target of around $9.00.
According to technical analysis silver could be headed towards the $13.00 level if ears are able to move the price under the $21.50 level. A break above the $25.00 level should accelerate buying toward $30.00.
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