Silver (XAG/USD) Price Forecast: Bullish Breakout Signals Higher Targets

Breakout Above Key Levels

Silver broke out of an inverse head and shoulders pattern on Friday above $79.50 and then continued to advance on Monday. Both a lower swing high at $86.32 and the 20-day moving average at $85.53 were recovered on Monday. The 50-day average at $82.20 was reclaimed earlier on Friday. Silver reached a new breakout high of $88.03 and a 12-day high during Monday’s advance. A daily close above $86.32 will be needed to further confirm the breakout of the head and shoulders bullish reversal pattern.

Support Confirmation and Trend Structure

The bullish head and shoulders pattern formed at support near the top of a long-term rising trend channel. A bullish breakout of the channel triggered in early-December, leading to the $121.67 record high. That was followed by a bearish correction to a low of $64.06 three weeks ago. Once key resistance is successfully tested as support, the bull trend may be ready to resume. It is not only the channel that suggests a solid higher swing low bottom has been established; the 20-week average also confirmed that support area, along with a 78.6% Fibonacci retracement area at $61.84.

Leg Up and Symmetry Targets

The first leg up off the bottom established a lower swing high at $86.32, resulting in a pullback and higher swing low at $71.98 last Tuesday. A second leg up was confirmed today with the breakout above the lower swing high. Symmetry in price between the two legs up a target at a $94.24, aligned with the 50% retracement level at $92.87. Together, a $92.87-$94.24 target zone is highlighted. Once the change in price between the two swings matches, a potential pivot level is identified. Since the price area is confirmed by another indicator, it deserves attention.

Higher Targets and Confluence Zone

The confluence of the 61.8% Fibonacci retracement at $99.66 and 127.2% projected ABCD pattern target at $100.29, identifies the next higher target zone. If buyers can continue to dominate price action, then the higher targets become possible. First there is a 161.8% Fibonacci projection of the ABCD pattern. That is followed by a 78.6% retracement zone at $114.49. Given the potential for higher targets, buyers will be watching pullbacks carefully for new setup opportunities.

If you’d like to know more about how to trade gold and silver, please visit our educational area.