Silver: A Strong Bullish But Also A Bearish Case

Silver’s Bullish Case

After briefly dropping below 15.00 late last year, silver has edged higher so far this year.

Bulls have remained remarkably skeptical as long as silver remained below its 200-day MA. That changed last week, when silver finally broke above that barrier, and prices have managed to hold above that barrier for more than a week now.

A second bullish sign is that silver’s RSI indicator has formed a bullish channel over the last month, showing steadily increasing bullish momentum.

The Bearish Case

Silver bears pin their hopes on two factors. One is the failed breakout in gold; the market for gold is much larger and more widely-followed market, so any prolonged rally in silver prices would likely require a sustained breakout and rally in the grey metal’s correlated big brother.

Apart from that, silver’s chart shows a Bearish Gartley pattern over the last few months, culminating in last week’s rally to converging resistance from the 78.6% Fibonacci retracement of XA, 127.2% extension of BC, and ABCD pattern completion in the 17.80-90 zone. These types of patterns project a target at the 61.8% Fibonacci retracement of the entire pattern, which in this case comes in all the way down at 16.20.

Bullish or Bearish? More Evidence Needed!

Short-term traders may want to wait for more evidence to help tip the scales. A break above converging resistance in the 17.80-90 zone would be a strong bullish signs and would open the door for a move up to 18.50 next. On the other hand, a breakdown back below the 200-day MA at 17.00 could target the 61.8% Fibonacci retracement of the ABCD pattern at 16.20 or lower.

silver_daily_20_May_2015

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