Silver has exceeded the top of yesterday’s range, has been moving higher all day, and has now broken above the downtrend line following the release of U.S. retail sales numbers for January. Today’s advance provides a new bullish signal that could see silver continue to advance in the near-term. Currently, silver is at $17.77, up 0.148 or 0.84% for the day.
Close-Up on Recent Price Action
Looking at the 4-hour intraday chart we can see more details of the recent price structure. Silver has broken above the downtrend line at the top of a descending parallel trend channel. Look at how the 21-period exponential moving average (ema), orange line, has identified essentially the same price resistance area as the trendline thereby giving a little more significance to the breakout.
We must keep in mind though that the trend line is approximate and not reliable by itself to signal a decisive price breakout that may keep going. Nevertheless, when considered along with the 21-period ema, that price resistance area takes on greater significance as it indicates that the trend line is probably in the right place.
Watch for New Evidence of Strength
To further confirm strength of the breakout silver needs to move above the most recent swing high of $17.866, and then close above it on a daily basis. At that point a bullish reversal is confirmed. This doesn’t ensure that price will keep rising but the chance that it will improves.
After that, a daily close above each successive swing high will provide new evidence for a bullish reversal. As shown on the enclosed chart, the subsequent swing highs are $18.082 and $18.334. A swing high has significance as that’s where resistance was clearly seen in the past as it is where an advance was reversed.
Given that a downtrend is defined by a series of lower (swing) highs and lower (swing) lows, that price structure starts to change once a prior swing high is exceeded.
For support, first watch today’s low of $17.575, followed by the most recent swing low at $17.345. Further down is the critical support level of $17.073 as it is the bottom of the parallel channel correction.