Silver's mixed technical signals points to a sharp move, but in which direction?

From a purely technical point of view, silver is either on the verge of a major breakout or a breakdown: conflicting technical signals are being displayed on the charts of silver, which is why I am neutral at this stage. Without further ado, let’s take a quick look at the charts of silver, starting with the long-term weekly time frame:

Figure 1:

Source: FOREX.com. Please note this product is not available to US clients.

As can be seen from the weekly chart, above, silver has already taken out both of its long-term bearish trend lines, suggesting that the bias is no longer bearish. However it is now testing the key $18.45-$19.00 resistance range, which was formerly support. This area could therefore turn into resistance and prevent silver from embarking on a rally. However, a potential break above this area would be a significantly bullish development. In this case, silver could easily rise towards and potentially beyond the next horizontal resistance at $21.50. Meanwhile, the RSI is still below the key 60 level. It needs to break above here in order to confirm that the momentum has shifted in the buyers’ favour. Let’s now take a closer look by reviewing the daily chart:

Figure 2:

Source: FOREX.com. Please note this product is not available to US clients.

The daily chart of silver is even more interesting: not only has the rally stalled at the key $18.45/50 resistance area, where the prior low meets the 38.2% Fibonacci retracement level, but it has also formed a large bearish outside candle on Monday. The 38.2% Fibonacci level represents a shallow retracement; thus if silver remains below here then one could conclude that the sellers may still be in charge from a longer term point of view. In fact, Monday’s bearish outside candle suggests that the sellers may have already taken control back from the buyers. What’s even more significant is that this candlestick pattern has been formed around the 200-day moving average ($18.40). So far however, the bulls have managed to defend the key $17.70 support level, which has led to a bounce in today’s session. Therefore, at this stage, it is too early to say which direction the metal is heading towards just by looking at this time frame. One particular bullish pattern was already formed last year when silver created a false breakout reversal pattern around the psychological $15.00 level, which covered in THIS article. Let’s now zoom in even further and look at price action in more detail on a 1-hour time frame:

Figure 3:

Source: FOREX.com. Please note this product is not available to US clients.

The devil is in the detail. Indeed, as can be seen from the 1-hour chart, silver has potentially formed a triple top reversal pattern around the above-mentioned $18.45 resistance level. Incidentally, this level also corresponds with the 161.8% Fibonacci extension of the last significant downswing. The resulting sell-off from there has caused silver to break below short-term support at $18.15. This level has just turned into resistance, which is a confirmation sign that the near-term trend is changing to bearish. That said, the short-term bullish trend is still intact. Thus going forward, traders should watch the trend very closely as a decisive break below it could pave the way for a move down to $1770 and potentially a lot lower.

So, in a nutshell then, while the long-term charts of silver point towards a major breakout, the shorter term charts suggest otherwise. Conservative speculators may therefore want to let price action determine direction and then trade in that direction.