Silver (XAG/USD) Price Forecast: Inverse Pattern Eyes Breakout

Potential Inverse Head and Shoulders Forms

While silver remains in corrective mode, if it can establish a higher swing low with Friday’s low of $73.98, a potential inverse head and shoulders pattern will have formed. An upside breakout of the pattern won’t trigger, though, until the lower swing high at $86.32 is recovered. Until then, a reclaim of both the 10-day and 50-day moving averages will occur above $80.22 and provide a minor sign of strength. But since consolidation has formed, the averages take on less weight as an indicator.

Nonetheless, they can help provide short-term clues and therefore a reclaim could precede a recovery of the $86.32 lower swing high. The reaction at the declining neckline of the potential bottoming pattern may also add context.

Long-Term Channel Support and Retracement Context

It seems significant that the bearish correction to a February low of $64.06, found support near the top of a long-term rising trend channel. If that potential higher swing low is sustained, the bull breakout of the channel in December will have confirmed. This would be bullish for the long-term trend. Moreover, the retracement almost completed a 78.6% retracement, which is at $61.84. Therefore, a future drop back into the channel should be watched as a sign of weakness. A higher swing low will be confirmed once the $86.32 lower swing high is recovered.

Key Resistance, Consolidation Risk, and Volatility

On the upside, key resistance is represented by the falling 20-day average at $90.00. Overall downward pressure remains while natural gas trades below the 20-day average. The top channel line is a key lower support indicator. Given recent volatility spikes, to the upside and downside, a period of consolidation would be healthy for silver and better establish support near the top of the channel. Follow through from key price levels will be key to gauging the potential sustainability of a move. But characteristics of a consolidating market may prevail and should be considered within a risk management protocol.

Weekly Inside Week Defines Key Levels

The weekly chart shows an inside week from last week with key short-term support and resistance at $73.98 and $86.32, respectively. Since the 38.2% Fibonacci retracement at $86.07 matches last week’s high of $86.32, it suggests an initial upside target for silver.

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