Silver Price Forecast: Faces Key Resistance, Possible Pullback Ahead

Silver has been testing resistance around a $32.65 swing high for the past four days or so as it consolidated around the highs. The resistance zone is represented by an internal uptrend line, a prior swing high from early-December at $32.33, and the 61.8% Fibonacci retracement near the high at $32.53. In other words, a likely solid resistance zone. On Monday, silver pulled back and generated a lower daily low and lower high, reflecting short-term weakness.

Since the pullback originates from a likely resistance zone, the price of silver may get weaker before attempting to go higher. It is also interesting to note that Friday’s price action had characteristics of a key reversal day. A new trend high was reached earlier in the session, but it was followed by sellers taking control and driving the price to the lows of the day by the end of the day.

Bull Breakout Failed to Hold

Moreover, notice the advance triggered a bull breakout above the trendline and then closed above the line for two days. That was a sign of strength. However, subsequent price action did not confirm strength and last Friday silver closed below the trendline. It looks ready to do the same today.

There is an increased chance that there has been a failed bullish breakout of the trendline and therefore that is supportive of a deeper pullback to test lower price levels, before the bull trend may be ready to continue. Further, during the advance a prior swing high at $32.33 was exceeded, which is a sign of strength. But that strength was not confirmed by a daily close above that interim swing high.

Bearish Decline Towards Support

A decline below Monday’s low of $31.71 is a sign of weakness and a likely precursor to lower prices. The first lower target is around the 50% retracement level at $31.18. Also, the 20-Week MA shows potential support at the same price area. Notice that the 20-Day MA (purple) is rising and close to converging with the 50% retracement level.

That relationship should be watched as it develops further since the closer those two price levels are to one another if approached, the strong the potential support. A test of support at the 20-Day line would be the first swing back since the line crossed above the 50-Day MA (orange) late last month.

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