Silver Gas Price Forecast: Eyes Recovery on Bullish Reversal Breakout

Silver broke out of a bullish double bottom pattern on Monday with a rise above 29.90, before encountering resistance at the day’s high of 30.35. The advance solidly reclaimed the 200-Day MA, currently at 29.85, and then reclaimed the 20-Day MA, now at 30.13. However, following the 29.90 high silver pulled back to test the bottom breakout area and 200-Day line as support and it has held so far.

This put it back below the 20-Day line where it continues to trade at the time of this writing. Silver needs to end the day above the 29.90 breakout level to confirm a double bottom breakout. If that doesn’t happen, the chance for failure of the bullish pattern increases. Otherwise, the expectation is for higher prices in the near term.

Trades Within Declining Trend Channel

Keep in mind that silver remains in a downtrend. Therefore, a continuation of the advance would be a counter-trend rally within a larger bearish correction. The expectation would be for resistance to be eventually encountered that is aggressive enough to turn price back down, leading to further declines in the price of silver, but not necessarily to new corrective lows.

There is a prior weekly high at 28.75 and the 50-Day MA at 30.93. Either price area could see resistance. The top trendline for a falling channel also marks an area of potential resistance. In that regard, a horizontal line has been added to the chart where two trend lines cross at 31.15, one rising and one falling. It represents potential resistance and will take on a slightly different meaning depending on when it is approached.

Watching for Strength Confirmation

The fact that buyers were aggressive enough to trigger a double bottom breakout and 200-Day MA breakout on the same spike indicates that strength should continue to higher prices. Silver had been at risk of further declines in the short-term following a drop below the 200-Day line on December 18. Nevertheless, sometimes corrections can get resolved with relatively sideways moves rather than by a continuation of the corrective swing.

That could be the situation with silver, at least in the near term. As noted, the 200-Day line has been recognized by the market recently and therefore a daily close above provides a bullish sign and a potential recovery above support for the long-term trend. Silver had been above the 200-Day line since it was reclaimed back in early-March last year.

For a look at all of today’s economic events, check out our economic calendar.