Silver Is in a Tight Range - Can It Still Move Higher?

Silver was in focus in early February but attention to it has since drifted as the metal remains rangebound. Here's what to look for.
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Silver prices have been in the spotlight and the commodity has been volatile.

While the SPDR Gold Trust  (GLD) - Get Report and spot gold prices were near the low end of the recent range and have been performing poorly, the lower-priced metal has done better.

A few weeks ago, spot silver and the iShares Silver Trust ETF  (SLV) - Get Report caught a big burst higher, ripping higher as “Reddit fever” gripped Wall Street.

After squeezing stocks like BlackBerry  (BB) - Get Report, GameStop  (GME) - Get Report, AMC Entertainment  (AMC) - Get Report and others, the next target put the silver market on watch.

Despite an initial gap-up though, silver couldn’t hold its gains. However, this one had my attention before the Reddit squeeze began as the technicals were lining up.

This isn’t GameStop; the silver market is massive. However, it has solid fundamentals and steady buyers thanks to silver’s industrial uses. As the trading range gets tighter and tighter, can we see an upside move?

Trading Silver

Daily chart of the SLV ETF.

Daily chart of the SLV ETF.

The price action of silver futures look similar although not identical to the SLV ETF. But for the purpose of broader access for investors, I want to look at the latter as opposed to the former.

As hard as it is (since I included them), ignore the moving averages on the chart for a moment. Let’s just look at two things: the trend and the recent range.

Following the big pullback from August, the SLV bottomed in September. From that point on, the stock has been putting in a series of higher lows, as uptrend support (blue line) guides it higher.

In early February, the SLV popped higher, but closed below the August high of $27.39 and well below the opening highs near $28. The next day it suffered a brutal gap down.

However, that’s where our second observation — the recent range — comes into play. Since that spurt of volatility, shares have been trading in a very tight range between $25 on the downside and $25.75 on the upside.

It’s been like that for two weeks now, as we now look for a range break.

Should we break the 61.8% retracement and 21-day moving average on the downside, bulls will be looking for a test of the 50-day moving average and uptrend support. Below that could put the $23 area on the table, which was solid support in January.

On the upside, a move over $25.75 puts the low from Feb. 1 in play at $26.10, followed by that session’s close at $26.76.

Above $26.76 and the move becomes rather technical, with the August high at $27.39 in play, followed by the $28 area. If silver really has momentum at that point, the $30 level will become key, followed by the 161.8% extension all the way up near $31.70.

But first we need a break of the range — regardless of which direction that is.