Silver (XAGUSD) Price Forecast: Bullish Reversal Reclaims 50-Day Average

Bullish Reversal Reclaims 50-Day Average

Silver confirmed a one-day bullish reversal on Monday, breaking out above Friday’s high of $83.78.

Concurrent with the daily breakout, the 50-day average at $78.11 was reclaimed, providing additional evidence for a bullish recovery. Buyers remain in charge at writing and the high for the day is $83.78. Not only was a higher daily high and low established, but the day’s low of $78.51 shows a successful test of support at the 50-day average. Today’s price action shows a relatively quick recovery of the 50-day indicator, after it failed as support on Thursday and Friday. This is bullish behavior.

Channel Support Holds at Retracement Low

Last week’s retracement low of $64.06 tested the top zone of a rising trend channel as support. The bounce off the top of the channel shows prior long-term resistance switching to support. That is bullish behavior, as well. But it also requires additional confirmation that Friday’s low will continue as a higher swing low. Silver had declined by $57.61 or 47.4% at that low, when measured by the January peak of $121.67.

Close Above 50-Day Confirms Strength

A confirmed reclaim of the 50-day average will occur on a daily close above the average, which is now at $78.11. That would confirm strength of the bounce and set the stage for reaching higher targets. Given the sharp fall from the peak, it could take some time for the silver trend to reestablish itself. That means that short-term volatility will likely continue and a consolidation phase would not be surprising.

Resistance Zones Define Next Targets

For now, key short-term support is near the 50-day average. There is a lower swing low of $92.20 that is part of the bearish corrective structure. It marks key near-term resistance and is joined by potential the 20-day average at $93.15. The 20-day average broke during the retracement and this is the second pullback towards the line to test it as resistance. If a recovery of both of those price levels can be confirmed, then higher potential targets come into view, starting with a 50% retracement level at $96.49. Higher up, is the 61.8% Fibonacci retracement of the bearish correction at $102.44.

Volatility Likely as Support Gets Retested

Given the conviction of sellers during the decline, further testing of support near last week’s low would not be a surprise. Therefore, watch for signs of resistance near or before the next target, that could result in another decline.

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