Silver Price Forecast: Bearish Engulfing Pattern Signals Weakness

Silver formed a one-day bearish engulfing pattern on Monday as sellers took control following a short pop to a four-day high of 31.48 earlier in the session. Resistance for the day was seen a little below the 20-Day MA (purple), now at 31.55. The subsequent decline followed a test of resistance around the 20-Day line is bearish behavior. And bearish sentiment will likely be confirmed with a daily close today below Friday’s low of 30.74.

Other bearish supporting evidence was recently indicated by the 20-Day MA crossing below the 50-Day MA (orange). Further, silver has been below resistance of the 50-Day line for 11 days after being above it previously. Although, recent daily highs failed to rise to the 50-Day line, but since it is close to the 20-Day line today’s bearish price action can also be considered a successful test of resistance at the 50-Day line.

Successful Test of 20-Day MA Resistance is Bearish

While silver is finding resistance just below both the 20-Day and 50-Day MAs, it has been seeing support recently around the confluence of the 61.8% Fibonacci retracement level at 29.68, an internal uptrend line, and a downtrend line. The bottom of the range is at the most recent swing low of 29.68, which matches the 61.8% price level. Therefore, until there is a decline below 29.68, silver has the potential to attempt to strengthen. However, a decisive decline below 29.68 will likely see silver retrace to the 78.6% level at 29.24, or the 200-Day MA at 28.96. Declines below either of the trendlines show weakening.

200-Day MA at 28.97 is Key Level

The long-term trend indicator, the 200-Day MA, has marked a dynamic support for the uptrend since it was reclaimed on March 4. Subsequently, a successful test of support at the 200-Day line was completed at the early-August swing low of 26.47. If the 200-Day line is tested again, it be the second test of the line as support since it was reclaimed.

Since the decline started towards the 200-Day line began from the 34.87 trend high that was hit about a month ago, there is a good chance it will mark support again. In other words, since downward momentum began from the peak, by the time the 200-Day line is reached, if it is to be reached, selling pressure may have diminished by then.

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