The price of silver (XAG) has experienced a dramatic and volatile start to 2026, characterized by a meteoric rise to an all-time high near $121 per troy ounce on January 29, followed by a sharp 47% crash to around $63.85 by February 6. Since that low, the metal has staged a relentless 32% recovery, trading near $84 as of February 20. This price action has left traders questioning whether the recovery marks a sustainable bullish resurgence or a temporary pause before further declines.
Technical analysis reveals a complex picture. The daily chart shows a developing cup-and-handle pattern, with the recent recovery towards $84 approaching the neckline of this formation. However, a hidden bearish divergence in the Relative Strength Index (RSI) suggests the price trend favors consolidation before a decisive move. For the bullish structure to remain intact, the price must hold above the critical $75 support level. A clean daily close above $84 would confirm the cup-and-handle pattern, potentially opening the door for a challenge of the $100 psychological level and beyond.
Market indicators present a mix of bullish and cautionary signals. On the bullish side, the strength of the Global X Silver Miners ETF (SIL), which peaked three days before spot silver, is a classic leading indicator suggesting underlying fundamental strength. Furthermore, the market is experiencing a rare backwardation in COMEX silver futures, with futures trading below the spot price, signaling physical tightness and urgent demand for immediate delivery.
Adding to the bullish case is silver's recent ability to rise despite a strengthening US Dollar Index (DXY), indicating robust underlying demand. Perhaps the most compelling medium-term signal is the extremely low net long positioning of Managed Money (hedge funds) at just 5,472 contracts, suggesting massive room for institutional capital to flow back into the market once a stable base is confirmed.
Conversely, several factors urge caution. The rally from the February low has been accompanied by steadily declining open interest in COMEX futures, a signature of a short-covering rally rather than fresh bullish capital entering the market. The Gold-Silver Ratio is consolidating in a bullish flag pattern; a breakout higher could see capital rotate from silver back to gold, capping silver's upside. The immediate path for March is seen as a consolidation between $75 and $92 as the market builds a base to attract institutional buyers. A break below $75 would crack the cup structure, inviting a retest of support at $71, $69 (100-day moving average), and potentially the $57 region (200-day moving average).
