Silver Price Forecast: Tests Key Support, Eyes Potential Bullish Reversal

Silver dropped to a retracement low of 28.33 on Monday and thereby completed a 50% retracement of the most recent advance. Support was subsequently seen leading a bounce intraday. Nevertheless, the drop today took silver below the 20-Day MA (purple), and it may close near it today. At the time of this writing silver is trading around the 20-Day line, currently at 28.63.

The relationship to the 20-Day line may provide clues relative to changes in supply and demand for silver. A daily close above the 20-Day MA, currently at 28.63, would indicate stronger demand than a close below the line. It may be significant because it is a clue that the price of silver may continue to head in the direction indicated by the daily closing price.

20-Day MA Should Be Watched

Notice the recent sharp rally and breakout through both a lower trend channel line and the 20-Day MA. That advance peaked last week at 30.19 and was followed by the current pullback. Therefore, the 20-Day line is given added attention because silver traded below it for around 20 days. Today’s pullback is the first test of the line since the bull breakout of the 20-Day MA on August 15. Therefore, if it holds as support and leads to a bullish reversal, the developing uptrend can continue higher to challenge last week’s high.

Potential Breakout of Falling Channel

If today’s low is sustained it may end up as a higher swing low relative to the August 8 bottom at 26.47. That would make the low the C point of a rising ABCD pattern with an initial target at 32.05. The target provides a guide as to what might be possible as ABCD patterns have a habit of reaching a key pivot once there is symmetry between the price change in two sequential swings in the same direction.

Watch 27.89 For Lower Support

Regardless of the potential for a bullish reversal off today’s lows, silver may yet pullback further. The 61.8% Fibonacci retracement at 27.89 along with top of a lower channel line point to the next likely support area if silver falls below the day’s low of 28.33. Strength indicated by the rally from the August low point increases the chance for a second enthusiastic advance once a retracement is complete.

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