Silver: Five-Wave Recovery Followed By A Potential ABC Correction Forms A Bullish Setup

Silver has made a very nice move to the upside, and we can clearly count five waves up from the July lows, which confirms that support is in place, at least temporarily. In a basic Elliott Wave bullish setup, a five-wave impulsive advance is normally followed by a three-wave ABC correction. As long as the correction remains corrective and respects key support levels, it can simply represent a temporary pullback within the broader bullish structure.

However, notice that the market came close to the 71.50 resistance level that we discussed previously, from where we can now see a pretty strong reversal lower. Price also broke below the lower trendline support of the impulsive channel, suggesting that a corrective ABC pattern may now be unfolding and could be approaching its end.

If so, the correction could find a base around the 60 USD area, which represents a major support level to watch. If we see stabilization and a recovery back above the channel resistance line and the 68 bullish confirmation level, then we could easily expect another move higher.

The basic guidelines are that wave 2 should not retrace beyond the start of wave 1, wave 4 should not overlap wave 1 in a standard impulse, and wave 3 cannot be the shortest of waves 1, 3, and 5. Once five waves are completed, an ABC correction can retrace part of the entire advance before the larger bullish trend resumes.