Silver Price Forecast: Silver’s 18% Drop Threatens Bullish Trend Structure

Silver broke down from a rising bearish wedge last Thursday and fell hard. It reached a low of $28.32 on Monday before there were signs of support leading to an intraday rally. At the low, the price of silver was down by $6.27 or 18.1% from the recent trend high of $34.58 in only six days.

The decline undercut a prior interim swing low of $28.75 from December thereby triggering a potential trend reversal signal as that swing low is part of the price structure of an uptrend of higher swing lows and higher swing highs. However, until there is a daily close below that low, the breakdown and potential bearish reversal is not confirmed.

Significant Selling Pressure as Multiple Support Levels Fail

During the decline there were several key potential support levels that failed, starting with a drop below the 20-Day MA last Thursday. Subsequently, a sharp decline below the 50-Day MA, two uptrend lines, and the 200-Day MA followed over the subsequent two days, including today. As discussed last week, there is the potential for an eventual test of support around the next lower trendline, since the two previous uptrend lines have failed, along with the long-term 200-Day MA trend indicator.

Rising Channel Suggest Further Downside

Since the 2022 bottom, the price of silver has been rising, and formed a large parallel trend channel. The current bearish correction shows a spike in volatility during a rapid decline to a 30-week low, reached today. Regardless of whether the lower trendline is eventually reached, the spike in volatility increases the chance that it might be.

Therefore, if silver rallies from Monday’s lows, it can be expected to eventually find resistance and turn back down. If for no other reason than there has been only one downswing so far. Given the wide price range of the past few days, potential upside for a rally also shows a wide potential price range. Support was seen today around the 78.6% Fibonacci retracement level at $28.21. That is close enough to the low to consider it as completed.

Initial Support Could Hold for a Rally

Monday’s high was $30.82, which essentially was a test of resistance around the 200-Day MA. That is also a bearish sign as resistance was confirmed around prior support. Nonetheless, the 200-Day MA is at $30.89, and it marks a potential resistance area during a bounce. Watch that price area along with the previous interim higher swing low at $30.81.

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