Thursday's Market Minute: Silver Squeeze Squashed

Silver traders were taken for a wild ride this week as the /SI futures contract opened with a big upside gap on Feb. 1, and at one point that day was up more than 20% from the Jan. 29 close on very heavy volume. Internet buzz about an effort to push the iShares Silver Trust ETF SLV into an explosive short squeeze as we saw in GameStop Corp. GME, AMC Entertainment Holdings Inc AMC, and other speculative names seems to be at least in part behind the move.

The /SI briefly broke above the upper boundary of a downward channel that began in early August – however, the surge was short-lived and prices rapidly retreated back within the channel, and are now trading near the 21-day Exponential Moving Average. Interestingly, Gold futures, which tend to show strong correlation with Silver, did not make a similar move and the two products are falling back in line with each other.

For Silver traders, the zone from 27 to 28 will be an important point to watch in terms of overcoming resistance, as this area includes the upper boundary of the channel, a volume node according to the Volume Profile study, and finally the yearly Linear Regression Line. To the downside, the confluence of the 50-day Simple Moving Average and the 64-day EMA near $25.50 seems a likely point to watch for support.

Photo by Nasonov Aleksandr on Unsplash