Wait... Was That a Bullish Silver Reversal? / Commodities / Gold & Silver 2019

Silverplunged on Tuesday, just as it was likely to afterthe triple reversal that we’ve been writing about, and it was decliningstrongly during Wednesday’s pre-market trading. And then it all changed. Silversoared before the U.S. markets opened and the white metal ended the session inthe green. We definitely saw a silver reversal. But, was it significant and canit be trusted?

Wedoubt that and the below chart shows why.

AboutThat Silver Reversal

Wedoubt the significance of yesterday’s reversalin silver,because daily corrections after the big daily declines are not something thatindicate a reversal. Conversely, it’s something normal.

Forinstance, the intraday reversal that we saw in early February should have been– theoretically – followed by higher prices. It wasn’t. It was simply abreather that silver took before continuing to decline. These daily pausesdon’t always take the same form. In late February, silvercorrected by simply rallying a bit without an intraday reversal. And in late September,silver’s pause took form of a significant slowdown in the pace at which silverwas declining.

Inall above-mentioned cases silver resumed its decline shortly. So, is this timereally any different? That’s unlikely.

Besides,silver had a good reason not to decline without looking back. The risingsupport line that’s based on the previous lows in terms of closing prices (Mayand July lows) was just reached in intraday terms. Since the line is based ondaily closing prices, and we didn’t see a daily close below it yesterday, wedon’t view yesterday’s price action as invalidation of the breakdown. Thesupport held for now, but that’s not enough to make the outlook bullish.

Moreover,let’s keep in mind what we wrote in yesterday’s Gold & Silver Trading Alertabout the size of silver’s decline so far:

Silverdeclined profoundly and it seems to be just starting its decline. Silverhas recently outperformed on a very short-term basis after having formed a shootingstar reversal. It doesn’t seem that just a one-day decline or something only alittle bigger than that is enough to really be a reasonable response tomultiple strong sell signs. Similar signals in the past used to be followed bymulti-dollar declines.

Themove that we’ve seen so far, is too small even compared to the lesser silverdeclines. And if we compare it to silver’s bigger declines, it’s almostnonexistent.

Evenif we consider yesterday’s pre-market downswing to be a part of the decline,the entire move is still tiny compared to even the smaller of the previousdeclines. Taking this comparison into account it’s even more likely that yesterday’sreversal was not the end of the decline in silver but rather a pause within it.

Allin all, predictinghigher silver prices here based on yesterday’s small reversal is notjustified – at least not yet.

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Arkadiusz Sieron
Sunshine Profits‘ MarketOverview Editor

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