What an amazing rush we've seen for Silver over the last month. My last post was about how Silver Perfectly Formed a Cup and Handle on the chart and within days of that post it had broken out to a new high, kicking off a rally of over 50% in the space of just 30 days. For long term stackers like myself it was beautiful to watch and in many ways it felt long overdue to me, but was it too much too soon? Probably not, but lets take a look at what the price action is saying anyway...
Above is the 4 Hourly Chart for Spot Silver. I do like this timeframe and it's the same one I used to point out the Cup and Handle last month. You can see the breakout at the previous high around $54 USD at the end of November and the rally since has been pretty strong but also smooth. There is a day gap there for Christmas and then we see an extra burst after Christmas where the price put on a 10% gain in a single day. However, from there I see a new signal that I think is worth pointing out.
The final green candle which marks the high is commonly identified as an Evening Doji Star. It's where there is a sharp move higher and quick retracement so the candle itself is short but the wick is much longer - to the upside. It is a common reversal indicator and while I am still pretty bullish on Silver I do respect indicators like this especially when the upside move over the previous month has been so strong. A consolidation or correction would not be any surprise.
What's especially interesting is that after the initial pullback we've seen another attempt to move higher and a 2nd Evening Doji Star - just incase you didn't see the first one. Silver has formed a lower high there and the chart here could be showing us a bit of a Bull Trap. At time of writing we are still slightly above the $71 USD mark which is where the first retracement arrived and we are again at a key decision point on the chart where a move lower through that level could be confirming that a consolidation or correction may be occurring.
Long term I am still bullish on Silver because of its strong fundamentals and we've seen some spectacular price divergence between the Silver markets in the East and Western worlds which does seem quite ominous. That's probably a topic for a separate post. Regardless, there are certainly shenanigans afoot and the only thing I am confident of is that we're going to see some more volatility here while the Bulls and Bears fight it out. For now I am being cautious and just watching the price action closely.
DISCLAIMER - This is not financial advice
