Silver Price Forecast: Consolidates Near Highs, Breakout or Breakdown Looms

Silver continued to consolidate on Monday as it confirmed the formation of a potential bull pennant pattern (purple). Monday’s low of $31.89 is the second point for the lower boundary line of a small symmetrical triangle. Notice that the pattern has formed above support of the 38.2% Fibonacci retracement level at $31.63 and it followed a sharp advance (pole). A successful test of the retracement level occurred on May 1. Buyers quickly took charge as seen by the long lower shadow. Similar bullish behavior took place today following the $31.89 low. Such intraday bullish behavior would be consistent with improving demand.

Above $32.99 is Bullish

The high for today of $32.99 is an initial upside price level to watch, as a breakout above it would follow an initial breakout for the bull pennant. Today’s low is the support price level to watch along with the lower boundary line. There are a couple related issues to be considered. Although there is a bull pennant pattern present, it has formed within an area of prior consolidation.

Therefore, the reliability of the upside follow-through following a breakout is questionable. Alternatively, a decline through the bottom of the pennant would be a bearish reversal from a small symmetrical triangle pattern. The potential bullish pennant pattern would be invalidated as it would not have triggered.

Confirmation of Strength Above $33.70

At the top of the pennant is the recent rally high of $33.70. That high becomes an initial short-term target and a new bullish signal if an upside breakout triggers. The prior swing highs around $34.24 to $34.59 from March would then become a target, as well as the long-term trend high of $34.87 from October. There was enthusiastic buying seen following the $28.32 swing low in early April. A 50% retracement was seen on the low and it was joined by an AVWAP level from the October 2023 swing low.

Bearish Below $31.89

A downside trigger, below $31.89 will likely lead to a test of support around the 200-Day MA, currently at $31.22. It can be watched along with the 50% retracement level at $31.00. Further down is the 61.8% Fibonacci retracement at $30.37. Finally, it can also be useful to recognize that the 20-Week MA has done a good job of defining support over the past several weeks. Therefore, a drop $31.91 will trigger a bearish decline below the 20-Week MA.

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