Silver (XAGUSD) Price Forecast: Bull Pennant Breakout Drives Fresh Record Highs

Record High Breakout Confirms Bullish Control

Silver broke out to a new record high of $86.27 with conviction on Monday, signaling that the buyers are back in charge. A higher daily low of $80.31 was generated at the time of writing, which is now near-term support. In addition to extending the bull trend above the prior high of $84.03, the advance began with a breakout of a bull pennant consolidation pattern seen in the daily chart that formed near support of the 10-day moving average and close to trend highs over 10 weeks.

The trend breakout will confirm with a daily close above $84.03, while the pennant breakout confirms above a lower swing high at $82.77. In addition, a breakout of an inside week was seen on the weekly chart above last week’s high of $82.77.

Rising Channel Breakout Accelerates Momentum

Bullish momentum accelerated in early-December following a breakout above the top boundary line of a rising channel. The breakout was preceded by a short rest of six days where volatility contracted and resistance near the top of the channel was successfully tested as a tight consolidation range formed above the 10-day average. As shown during the recent correction, the 10-day average continues to mark an area of dynamic support for the bull trend.

Correction Completion Signals Renewed Demand

Monday breakouts confirm the continuation of the bull trend and the completion of the bearish correction. The correction completed near the 38.2% Fibonacci retracement level for the prior upswing. A recovery from that healthy pullback into new highs is a sign of underlying strength in demand. Notice that silver was able to rise aways from the top of the channel before the first notable correction occurred. Since support was seen around the 20-day average during the correction, bullish momentum seen following the channel breakout has the potential to return to some degree.

Long-Term Breakout Reinforces Bullish Outlook

The breakout of the channel followed another important long-term bullish signal in October, as silver rose to a new all-time high above $49.81. Monday’s sharp advance further confirms strength indicated by that long-term breakout signal as well, which preceded the channel breakout. There are a few price levels derived from Fibonacci extensions where some resistance could be seen. A 200% extension from the 2011 bear market is $87.98 and a 223.6% extension of the same decline is $99.00.

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