Silver plunged towards the $22.20 support area on the weekly price open this week, following last Friday’s big sell-off in the metals market and gold’s break down under the $1,700 level.
The shiny metal is at risk of further heavy losses after breaking under a notable triangle pattern last Friday and also due to the large amount of bullish sentiment from retail traders towards the price of silver.
Worrying, traders are in complete denial about the price of silver and are actually increasingly there buy positions or holding onto losing positions as the popular metal falls to level not seen since November last year.
Traders could be anticipating that the US infrastructure bill will be price positive for silver from an inflationary perspective, as silver tends to rise when fiscal spending in the United States increases.
The technical show it will be a hard road ahead for silver prices if the $24.80 level is not reclaimed this week. Once again, sentiment is offering a major warning that silver could be headed significantly lower.
The ActivTrader Market Sentiment tool is showing that 90% of traders are expecting more gain in silver. Such a one-way and biased sentiment skew rarely ends well in trading.
Until we see sentiment dropping I have concerns that silver may tumble below $22.00 and wipe-out early bulls or the traders who are increasing buy positions around current trading levels.
Silver short-term Technical Analysis
The short-term technicals for silver shows that a bullish inverted head and shoulders pattern has been invalidated and this is one of the technical reasons why silver tumbled towards the $22.20 level.
Traders should expect the bearish trend in silver to remain place while the price trades below the key former swing-low, around the 1.2460 area. Only sustained gains above this area can start a meaningful price rebound.
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Silver Medium-term Technical Analysis
The daily time frame shows that the price of silver has started to trade under a large triangle pattern after breaking down under the $24.80 level last week.
It is possible that a drop towards the $20.00 support level is coming if the triangle pattern breakout stays in place. Traders should be aware that a large, inverted head and shoulders pattern could be developing on the daily time frame.
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