Silver has made a very nice move to the upside, and we can clearly count five waves higher from the July lows, confirming that support was in place at least temporarily. In a basic Elliott Wave bullish setup, a five-wave impulsive advance is normally followed by a three-wave correction. If that correction remains corrective, it can represent a temporary pullback before the larger bullish structure resumes.
However, notice that silver came close to the 71.50 resistance level that we discussed previously, from where we saw a pretty strong reversal lower. Price also broke below the lower trendline support of the impulsive channel, which caused a deeper and complex WXY correction. We are now wondering if this correction has already completed, as the market is attempting to break above the upper channel resistance near 66.60.
A daily and weekly close above 66.60 would provide a stronger bullish confirmation and suggest that the ABC correction is complete. In that case, the next important resistance and upside target would again be the 71.50 area.
Basic Elliott Wave Bullish Setup Formation
The basic Elliott Wave 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. In the current silver setup, the key question is whether the recent complex WXY correction has already found its low and whether the break above 66.60 can confirm the next bullish phase.
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