- The price of Silver has reached a crucial point in its technical development.
- There is a possibility of both a continuation to new highs and a deeper correction.
- However, the overall trend remains bullish, favoring a possible resumption to the upside even if a correction occurs.
The price of the Silver (XAG/USD) is consolidating at $31.65 on Tuesday after pulling back from Monday's eleven-year high at $32.51.
The pair remains in a short-term bullish trend with a tendency to extend. It could be forming a bullish pennant continuation pattern (shaded rectangle on the chart).
Silver 4-hour chart
If the price of Silver breaks above the consolidation rectangle at the close, the bullish flag will be activated and the uptrend will continue to the next target at $33.83-5. If the uptrend continues, Silver could reach $35.34, a former key high.
However, a closing base break below the lows of the current consolidation range at $30.95 would likely signal a deeper correction.
Silver Daily Chart
The daily chart shows bearish signals that could indicate the possibility of a deeper pullback, however, it is still too early to say for sure.
There may be a Tweezer Top candlestick pattern forming (shaded circle above) which, if confirmed, would be a short-term bearish reversal signal. Tweezer Top candlestick patterns occur when the price reaches a high and forms two consecutive days that have long top wicks – the thin part of the candle from the shaded body to the high – and whose highs are at a similar level. If Tuesday's candle closes with a shape similar to the one at the time of writing these lines, it will be a sign that a Tweezer Top has formed, with bearish connotations.
The Relative Strength Index (RSI) is also deep in the overbought zone on the daily chart, suggesting that traders should not increase their long positions. If the RSI breaks out of the overbought zone at the close, it will be a sign that a deeper correction is underway.
A more bearish correction is likely to initially find support at the $30.00 level. However, as short- and medium-term trends remain bullish, Silver is likely to resume rising once the correction ends.
A decisive break below the $30.00 level would be necessary to call the uptrend into question.
A decisive breakout would be one accompanied by a long Japanese candle that closed near its lows or three red Japanese candles in a row.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
