Silver has rallied over 50% in just a few months, but it has now reached $14, a technical resistance and an area which will test the strength of this rally.

The question is, will silver break up through this resistance line and continue to rally or fail and enter a correction?

Firstly lets take a look at the other technical indicators on silver and what they can tell us.

The Relative Strength Index stands at 72.67, so it is in the “overbought” zone that exists over 70. Over the last couple of years this indicator has been a pretty reliable signal of when silver was due to correct, with the exception being when silver spiked to a new high at $21 and the RSI continued to rise even though it was significantly past 70 and overbought.

The STO and MACD are also high, and although they have been higher, they are still in the overbought area and so suggest that silver’s rally may be going to take a pause for breath.

Having said that, the fundamentals for silver are still relatively strong, with the investment community beginning to recognise the future inflation nightmare coming our way. Therefore although we think silver prices could correct (possibly hard and fast) in the short term, we are not giving any sell signals since there is still a great deal of upside potential in silver over the medium to long term.

Stay tuned for updates.

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