Silver (XAG/USD) fell to about 19.00 and then spiked down to 18.55 at the end of April.
Since then, it has been consolidating as you can see in the 4H chart.
1) Price is trading between the 18.55 and 20 level.
2) The moving averages (200,100,50) are clustered together, which reflects the state of consolidation.
3) The RSI tagged 70, then fell but stayed above 40. This reflects a nascent development of bullish momentum.
If the bullish momentum carries, the RSI should hold above 40 and push above 60 and eventually 70. If it stays under 60 as it did on 5/22, the RSI reflects consolidation.
As for price, a rally above 20.00 is a bullish breakout, though there is another resistance around 20.35-40, and a falling trendline you can see on the daily chart. If on a subsequent pullback, price can stay above the cluster of moving averages, a bullish trend in the short-term is developing.
On the daily chart, you can see that the support in the 18.55-19 area extends back to November 2013. A break below 18.50 opens up 16.50-17.00 area, which is a support/pivot area going back to 2007.
On the daily chart, you can see that 20.35-20.50 is
1) a support/resistance area going back Sept. 2013.
2) where the 200-day SMA resides
3) around a falling trendline.
Double Bottom Scenario:
A break above 20.50 thus opens up a bullish outlook toward the 22.00-22.17, 2014-high. If this scenario materializes, silver would be forming a large double bottom. It is still a bit early to be calling a bottom on the daily, but it sure looks promising.
Earlier: EUR/USD – Look for a Pullback for Better Entry
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