Silver Price Suffers Colossal Damage

London (May 4)  The sharp 11 percent correction in silver prices in the last three weeks has sent the bulls running for cover. From $18.50 in mid-April, the precious metal has turned on its head and currently trades near $16.50. The colossal damage has dented the optimism of the bulls, and unfortunately, we may see some more downside.

Source: Kingworldnews.com

On April 16, 2017, I had submitted an article titled Silver Has Finally Done It in which I had said that the precious metal would aim for $21, as the momentum was likely to remain strong. This has easily proved to be my worst call yet, and I do not have any excuse to make. I was caught off guard by the sharp reversal which has been merciless, to say the least. I will not shy away from saying that the rapidity of the decline must have surprised even the bears.

The bullish momentum has been punctured severely as important moving averages, major support levels have been taken out and we are testing new lows as I write this article. A majority of the gains for this year have been wiped out. The daily silver futures price chart below conveys my words more clearly.

Source: TradingView

The only relief in this mayhem is that the commodity has become deeply oversold on both 14-day Relative Strength Index and the 14-day Money Flow Index. The 14-day RSI reading stands at 22.51, while the 14-day MFI reading is at 8.69. Readings below 10 on MFI are generally indicative of dangerously oversold conditions and a technical pullback can happen anytime. So, shorts should not become too complacent and take their profits home.

Source: SeekingAlpha