Silver Has a Wild Drop and Bounce Early on Monday

LONDON (February 2) Silver has plunged again in the early hours on Monday, breaking below the 50-day EMA and even threatening $70. That being said, we have bounced a bit, so now we need to see if the Americans will pick this up and drive it north.

Quite frankly, a big candlestick like we saw on Friday almost never happens in and of its own vacuum. Typically, there is follow-through, and that is part of what we saw early in Asia.

Psychological Support Levels

Really at this point in time, it does look like we could also go sideways, which would be a very bullish sign. A couple of days of sideways action might get value hunters back into this trade.

If we break below the $70 level, I think silver is probably done for quite some time. The move has been ridiculous in both directions now, but quite frankly, I think you have a situation where you have to watch every large round, psychologically significant figure to see how the market behaves, meaning every $10.

So far, the $70 level certainly looks to be the floor in the market. Whether or not that holds remains to be seen. To be honest with you, this is not a market I would be messing around in right now. While the reward could be rather large, the reality is the risk is equally so. This is a market that if it does go to the upside, it is probably going to be very slow and painful. There will be a lot of trauma done to trading accounts on Friday.

FXEmpire