Silver Price Forecast – Bullish Flag Pattern Continues to Form

Silver has been consolidating in a relatively small downward sloping channel since hitting a swing high of $18.84 in early-January. That high completed a 14.12% rally off the $16.51 swing low from early-December, which was at support of the 200-day exponential average (ema).

To date the subsequent decline found support at $17.07, which also completed a 78.6% Fibonacci retracement (close enough at $17.01) of the 14.12% advance. Further, support of the long-term uptrend line and lower parallel channel line congregate around the most recent swing low of $17.07.

Breakout of Bullish Wedge

The advance off the December low triggered an upside breakout of a bullish falling wedge as price moved above the downtrend line and 55-day ema around $17.13. This trend continuation pattern has seen only one leg up so far and is likely to see at least a second leg up at some point.

Once a breakout of a price pattern occurs it is normal and healthy to see a retracement of the breakout advance before price is ready to continue, in this case higher. That’s what we’ve been seeing in silver over the past several weeks or so as it consolidates with a downward slope.

Bullish Flag Pattern Formed

During the consolidation phase a potential bullish flag has formed in the daily chart of silver. Although the consolidation phase may continue for a while longer the $17.07 swing low could be the low of the pattern. The uptrend line provides possible future support during short-term weakness. In addition, there are several other price levels to watch for support to be seen if silver falls below the uptrend line.

Price Support Zone

A potential support zone occurs from around $17.07 to $16.86. It includes the recent swing high, the 78.6% Fibonacci retracement ($17.01), the 200-day ema around $16.92, and the completion of a falling measured move at $16.86.

Potential Bull Flag Breakout

At this point, the first indication of a bullish breakout of the flag pattern occurs on a decisive move above $18.15. Strength is then confirmed on a daily close above the most recent swing high of $18.33. The initial minimum target would then the 127% Fibonacci extension of the declining channel at $19.32.