Silver Awaiting Range and Trendline Breakout Confirmations

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Silver Awaiting Range and Trendline Breakout Confirmations

Exhaustion? Silver has been bearish since July, but has more or less stabilized in November. After what looks like a exhaustion swing at the end of November, silver rebounded from that low on the year at 14.40 to a December-high at 17.31. Since then it has retreated and consolidated around the middle of this range as we can see in the 4H chart.

Silver (XAG/USD) 4H chart 12/29
silver 4h chart 12/29
(click to enlarge)

Unclear Breakout: The 4H chart also shows that price has been consolidating in a range roughly between 15.52 and 16.22. At the end of last week price cracked the range resistance, but the breakout is still unclear as price has held below 16.30 since then.

Bullish Confirmation: As we start a new week, the range breakout is awaiting confirmation. If price can hold above the 15.85-15.90 support/resistance pivot area, which also represents the central pivot of the range, then the bullish outlook from the breakout remains in play.

In the bullish scenario, if we use the width of the range as a projection (0.70). The target would be around 16.90-16.95, which would be right at a previous support pivot.

Failure: If price falls back below 15.85, we could still be in consolidation, and the current short-term bearish bias will remain because price would held below the cluster of SMAs in the 4H chart, and the RSI would have held below 60 after tagging 30 – signs of bearish development.

A bullish breakout confirmation in the 4H chart would also help to confirm a bullish breakout from a trendline seen in the daily chart.

Silver (XAG/USD) Daily Chart 12/29
silver daily chart 12/29
(click to enlarge)

Exhaustion: The daily chart also suggests that silver may have completed an exhaustion dip in late November, after which a rebound broke above a falling trendline from July.

Pullback: After the breakout, there has been a pullback returning price below the 50-day SMA, and the RSI is still under 60. These technical conditions reflect maintenance of the bearish bias and momentum.

Awaiting Bullish Confirmation; Targets: However, price action is usually a more important clue the RSI and SMAs. If price confirms the current short-term range breakout, it will also confirm a medium-term trendline breakout. This would suggest a bullish outlook above our 16.90-95 target, to the 17.31 December high, and with risk towards the 17.80 October-high.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.