Silver in a Major Triangle Breakout to the Upside

Silver in a Major Triangle Breakout to the Upside

Multi-month Consolidation: Silver has been trading in a choppy consolidation since making a low at 14.65 in December 2014. After a rally to 18.47, the current 2015-high, it started to coil in a triangle as we can see in the daily chart.

Silver (XAG/USD) Daily Chart 5/15
silver daily chart 5/15
(click to enlarge)

Multiple Resistance Breakout: This week, price escaped a mini-consolidation range in late April and May, breaking not only that consolidation resistance, but also the triangle resistance and the 200-day simple moving average (SMA), as well as the March-April high, just under 17.50. This sharp breakout suggests that we might see silver at least test the high on the year at 18.47 with risk of breaking through towards the 20.00 psychological level. If we get a pullback, a hold above the 16.60-16.75 area would be a good indication that the breakout is still valid.

False Breakout Scenario: A break below 16.40 however would indicate a false break to the upside, and put pressure back to the 14.65 low from last year. This would make more sense when we stalk the breakout in the 4H chart.

Silver (XAG/USD) 4H Chart 5/15
silver 4h chart 5/15
(click to enlarge)

Breakout Confirmation Cues:
The 4H chart shows the breakout from a recent consolidation between roughly 15.80 and 16.75.

We noted that upon a pullback, a bullish market should find support in the 16.60-16.75 area, which is the top part of the noted consolidation range (It’s really 16.56-16.76). A break below 16.40 would put price under the cluster of 200-, 100-, and 50-period SMAs, which would invalidate the current breakout.

Another cue we should look for is the RSI. IF the 4H RSI can hold above 40 after a pullback, the bullish momentum would still be in play. Otherwise, we would likely be back in sideways momentum, with near-term bearish pressure back to the
15.80-16.00 range lows.

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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