A potential bearish warning sign has posted on the chart for silver, and a critical support level now stands out as the level, if broken, that could signal a top for the high-flying metal.

Last Thursday, I wrote an article about silver, which we described as being “on a tear.” We have since added 10% and then given back 10%, rejecting a high just shy of the psychologically important $50 mark.

I also wrote in the previous report:

“This is no reason to go short. Selling something that’s going up is dangerous, bordering on stupid. Sure, it probably can’t go on, but for now, there’s no sign of a reversal in sight.”

This line from last Thursday’s report seemed to create a bit of a stir and it looks like it was quoted on at least one newswire story.

But it begs the question, what is a valid sign of a reversal?

First, here is a current chart of silver showing the upward channel:

chart
Click to Enlarge

How about that candle with a large range but a really small real body? Yes, that sort of thing—a “long-legged Doji”—is always a signal to look for a market turn.

On Monday, silver traded up to 49.820. In Tuesday’s early-morning session, we had traded over 10% off of this high.

Interesting times. Where did we top out the last time around, when Bunker Hunt was buying all the silver in sight? Around $50, give or take.

Channel support is at 42.735. We would “call a top” if the market drops through here, especially if it happens quickly.

By Clive Lambert of FuturesTechs.co.uk