Silver tumbled on Tuesday, falling below the support (now turned into resistance) barrier of 14.35, defined by the lows of the 15th and 16th of August. The white metal has been trading within a downside channel since mid-June, while the dip below 14.35 has confirmed a forthcoming lower low. Therefore, we would consider the near-term outlook to still be negative.
In our view, the break below 14.35 may have opened the way for our next support zone, near 14.05, marked by the low of the 28th of January 2016. Another dip below 14.05 could carry larger downside extensions and may encourage the bears to drive the battle towards the 13.70 zone, which acted as a strong support territory back in December 2015 and January 2016.
Shifting attention to our short-term oscillators, we see that the RSI turned down after it hit its respective downside resistance line, and thereafter, it fell below its 30 line. The MACD, lies below both its zero and trigger lines, pointing down. These indicators suggest strong downside speed and corroborate our view that silver may pe poised to continue drifting lower for a while more.
That said, having in mind that the RSI, although still pointing south, stands within its extreme bearish territory, we would be cautious of a possible corrective bounce after the bears reach the 14.05 level, perhaps for the price to test the 14.35 zone as a resistance this time.
On the upside, we prefer to wait for a move above 14.80 before we start examining the chances of a decent recovery. Such a move may confirm the upside exit out of the aforementioned channel and could initially aim for the psychological barrier of 15.00. If the bulls prove strong enough to overcome that barrier, then we may see them targeting the 15.25 area, which was proven a strong support from the 19th of July until the 13th of August.
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