Silver tests an important support

Silver futures have come under pressure and are now testing an important zone of support—an area that must hold to maintain confidence that silver is building a tactically bullish cup-and-handle pattern. A failure to hold this zone would increase the risk that the recent highs evolve into a double-top formation.

This support zone is from 49.23 down to 48.45 and defined by:

• 26- and 40-day moving averages at 49.30 and 49.06, respectively.

• Tactical triangle breakout and retest support at 49.23-49.00.

• 61.8% retracement of the October 28-November 13 rally at 48.91.

• The uptrend line from October 28 at 49.45.

If silver can defend this support zone (Chart 1 and Chart 2), the cup-and-handle pattern remains viable, with room for a falling—or bullish wedge—formation to serve as the handle.

If silver does not hold support, then the late October and early November lows near 46.52-45.51 become exposed as the next significant support area. A breakdown below that zone would elevate the risk of a double-top pattern and open the door to deeper retracements at 44.15, 40.98, and 37.80 (Chart 3).

Chart 1: Silver futures with price patterns and trend lines

Chart 2: Silver futures with Fibonacci retracement levels

Chart 3: Silver futures with double top risk for deeper retracement?