Silver (XAGUSD) Price Forecast: Holds Support as Bullish Wedge Pattern Develops

Silver continued to consolidate near recent highs on Monday, but it did manage to successfully test support at the near-term uptrend line. The low for the day was $35.42, right at dynamic support of an uptrend line rising from the April swing low.

That was a four-day low and it followed a break below the 20-Day MA (purple), now at $36.12. Subsequently, buyers took back control and drove the price back up to near the highs of the day. The high of the day was $36.23 at the time of this writing and it looks likely that silver will end today’s session in a similar relatively bullish position.

Bull Hammer Forms

Moreover, Monay’s price action looks likely to complete a bullish hammer candlestick pattern. Notice that resistance at the high of the day of $36.23 was near the 20-Day MA. If the day ends with a hammer pattern and with the price of silver up for the day, there is the potential to reclaim the 20-Day line soon. An upside breakout will be triggered on a breakout above today’s high, which will also indicate a reclaim of the 20-Day line.

However, caution is warranted as silver is trading inside a small potential bull wedge consolidation pattern. The potential for follow-through in the near-term may be diminished due to activity within the pattern.

Bullish Pattern Forms Above Key Support

There is certainly the possibility that the wedge will continue to form as the pattern fills out. In addition to the wedge forming above an uptrend line, most of recent price action has occurred above a prior trend high at $34.87 as well. And last week a minimum 38.2% Fibonacci retracement of an internal upswing was completed, although support was found slightly above the $35.15 retracement level at $35.28.

Rally Above $36.84 Signals Wedge Breakout

Regardless of the potential for further consolidation within the confines of the wedge price structure, a bull breakout will trigger on a decisive rally above last week’s lower swing high of $36.84. That is also a weekly high. If the advance is subsequently confirmed by a breakout above the trend high of $37.32 from two weeks ago, it looks like silver could head towards the next higher target zone from $38.46 to $38.61.

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