Silver closed trading yesterday having broken out of a key technical 4+ year downtrend. Silver started the day below this level, but by the time futures markets opened, it has challenged and broken above this key level, around $16.80/oz – $17.00/oz.
Although true confirmation as always will never be known weeks or months after the fact, the break of this key technical resistance level could fuel short-covering on futures markets and attract momentum buyers which could be the perfect situation for silver to make a very significant price surge to the upside very quickly. If the silver price maintains $17+ an ounce here, we could very well see the price accelerate gains to the $20 level very quickly.
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Looking at the breakout on the day chart below puts near term activity into focus. The key battleground will likely be the March high of $17.40. A break of this level will likely trigger short selling, adding rocket fuel to push silver to the yearly high of $18.50 and within shouting distance of the $20 range or higher if price action accelerates.
This event would be the first indication that the long-term downtrend in silver prices has ended and the next phase, either near-term consolidation or the trigger for a rally to $20/oz or higher. We will be watching closely.