Silver Futures Index $SILVER (SILVER)

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Navigating Silver’s Volatility: Patterns, Support Challenges, and Breakout Signals
By: Bruce Powers | January 16, 2024

• As silver navigates through consolidation, the convergence of moving averages points to a looming burst of volatility, possibly marking the end of an extended period of subdued price action.

A narrow range low volatility day was seen in silver on Monday. It tested resistance around the internal uptrend line and 61.8% Fibonacci retracement, which was previously support, with a high of 23.33. Once support becomes resistance in a weakening trend, the potential for a bearish continuation increases. A drop below today’s low of 23.11 is short-term bearish but it keeps silver trading within a consolidation range until a breakout of the range. The range is a full weekly candle that goes from last week’s low of 22.48 to the high of 23.53. Trading this week could easily stay within last week’s range.



Weekly Bullish Pattern

Last week’s candlestick pattern is a bullish doji hammer as the doji is within the top half of the week’s range. This provides some optimism for the bulls as it indicates last week’s low of 22. 48 may hold and be the low support level for now. Yet, silver faces clear resistance that needs to be overcome for a bullish rally to follow the current correction.

Convergence of Moving Averages Heightens Risk of Volatility Pop

Silver is below its trend indicators. Both the uptrend line and all the moving averages, 20, 50, and 200-Day moving averages, have been tested as resistance as of last week. Further, volatility could pick up very soon. Notice that the three moving averages have converged together reflecting very low volatility in silver. Also, notice that this is occurring during a period of relatively sideways price action. Typically, an increase in volatility follows periods of low volatility, especially extreme low volatility.

This situation puts silver at risk of a sharp move in either direction in the relatively near future. It may be the beginning of a continuation of the rally up from the October swing low, or it could lead to further tests of support down near the uptrend line. Silver has been consolidating within a narrowing range for the past eight months or so. Converging moving averages may reflect the beginning of the completion of the consolidation phase.

Signs of a Completed Correction

A falling ABCD pattern may have completed last week at the 22.48 low. If so, it would mark the end of a correction in a developing uptrend. If so, a breakout above last week’s high of 23.53 signals the possible end of the correction and continuation of the uptrend from the October low. A daily close above 23.53 will confirm the breakout.

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