Silver (SLV) has broken the $22 level and is now at its lowest levels since July of last year. Taylor Dart explains why bulls need to make a stand, otherwise silver could fall to $20 before the end of the year.While it’s been a rollercoaster ride for gold (GLD (NYSE:)), silver (SLV) has been much more volatile recently, plunging 4% on Wednesday to close below the pivotal $22.00/oz level. This is where the metal broke free in July 2020, at $21.20/oz to $22.00/oz. Any break below that level would indicate a bad development. Fortunately, the bulls are trying to play some defense in this area, and at the same time, we’re seeing sentiment move onto a short-term buy signal. In the past sentiment buy signals led to high forwards returns on the metal. They also typically prevented any further declines to 10% or lower. These signals suggest that the silver price is likely to be at its bottom or has already stabilized. Even more crucial than the sentiment is the technical picture. This point sits at a critical level. Let’s take a closer look below:

(Source: Daily Sentiment Index Data, Author’s Chart)

As shown in the chart above, the violent 8-month correction since February for silver has finally forced many bulls to throw in the towel, with bullish sentiment sliding from 78% in February to just 20% this week. This huge decline in bullishness suggests that 1 in 5 investors is now bullish on silver. That’s down from 4 out 5 investors as we enter the back half Q1 2021. It is good news for bulls on the short-term, since extreme pessimism often leads to permanent bottoms within the precious metals sector. This was September 2018. The metal rallied more than 14% in the five-months and 34% the 12 months following. It was an excellent time to be a bull silver, but you had to buy at a time when most people were giving up. The sentiment is important in order to find the least resistance path for precious metals markets. However, the technicals can also be vital.

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