Silver (XAGUSD) Price Forecast: Fails to Hold onto Gains

Silver broke out to a new trend high of $39.13 on Monday before encountering resistance. Sellers subsequently took control and drove the price down to the lows of the day. Currently, the low of the day is $38.11, but trading continues near the lows of the day at the time of this writing. Therefore, silver could fall further before Monday’s session closes.

Nonetheless, it looks likely to end the day with a bearish shooting start candlestick pattern. The bearish pattern will trigger on a drop below today’s low. However, given the relatively wide range for today, silver could trade within the range for a bit before pulling back, if it is to do so.

Short-term Rest Looks Likely

The big breakout for silver was last Friday when it broke out of a four-week sideways basing pattern with enthusiasm. It ended the week with buyers in charge as the closing price was near the highs of the week. Notice that resistance was seen on Friday near the lows of a resistance zone marked by the confluence of three price levels from $38.46 to $38.61.

Nonetheless, the bulls retained control earlier in Monday’s session as well leading to the higher top. Resistance was seen near the midpoint (dashed) of a rising trend channel, which can typically cause a reaction in price.

Larger Bull Trend Strengthening

Although strength was indicated by the breakout above the top of the resistance zone at $38.61, the advance to the midpoint of the trend channel and subsequent bearish reaction is a sign of exhaustion. At least enough to possibly pullback and test the prior trend high around $37.32. In addition, there is a blue top line of another trend channel challenged today as well.

Since the market seems to be recognizing the trend channel, the expectation is for a continuation towards the to of the channel once a bearish retracement is complete. Not only was today’s rejection of price near the channel midpoint a recognition of the channel structure, look at where silver has recently come from.

Launched from 20-Day Line

Essentially, from June 30 to July 10, silver was finding support around the lower uptrend line of the ascending channel. Moreover, additional power was signaled by the retest of the 20-Day MA (purple) prior to the launch. For approximately six days support was tested around the 20-Day MA. Once the 20-Day line converged with the uptrend line, the price of silver started to move higher with momentum.

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