Silver Forecast: Rallies to Test Major Area

• I review silver’s sharp rally above $50, highlighting key resistance near $51.50 as the next major test.
• While momentum looks strong, a failure here could mark a lower high and trigger a deeper pullback toward $46 or even $42.

Silver has exploded to the upside during the trading session here on Monday, breaking above the $50 level. It will be interesting to see how this plays out because we are in an area that I think is crucial. If we can break above the $51.50 level, then we will probably continue much higher. That being said, it’s worth noting that we are getting fairly close to that area that caused so many problems previously, as we are a bit overdone and then pounded to the downside.

Was it Distribution?

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The question is, was that distribution? I think we’ll find out in the next day or two. It’s very important to watch this market because $50 obviously has a lot of psychological influence, but I think $51.50 is where the rubber meets the road, as it were.

That being said, the volume did pick up a little bit during the session, and we did look close toward the very top of the candlestick, which is bullish. I think the next 24 hours will tell us where we’re going for a much bigger period of time. If we sell off here, then that, at least in theory, could end up being a lower high, and a lower high is a situation where you are basically looking at the end of the trend or something close to it.

If we turn around and fall from here, breaking down below the 50-day EMA—and granted, we probably won’t do it in one day—then the market really starts to unwind. I think at that point in time, you probably have the trend just absolutely collapsing. The 50-day EMA at the $46.23 level is an area that you need to pay close attention to. Anything below there, I think, opens up the door to $42, followed by the $38 level, which is right around where you’re going to meet, at least in that general vicinity, the 200-day EMA.

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