The price of silver (XAG/USD) has extended its recent retracement on Wednesday, sliding from the $33.20-$33.25 resistance zone. Silver has dropped to a new daily low, touching approximately $31.60, marking a near 1% decline during the Asian session.
Although the drop suggests further downside potential, the mixed technical setup warns traders to remain cautious before making any assumptions about deeper losses. This article from Vestronmix offers an expert-level analysis of the issue.
The Recent Price Action and Technical Setup
The most recent price action suggests that silver is facing significant resistance at the $33.20-$33.25 zone, which has held firm in recent trading sessions. This resistance has created a clear ceiling for silver, keeping the price within a tight range.
Over the past few weeks, silver has been struggling to break free from a descending channel, which is a technical pattern indicating a period of downward pressure. In this case, the descending channel resistance is keeping the price in check, reinforcing the bearish sentiment in the short-term outlook.
Silver‘s inability to break above the upper trendline of the channel has resulted in a pattern of lower highs and lower lows, signaling that the bears remain in control. However, it is important to note that the bullish flag pattern is forming alongside this channel.
The flag pattern is generally a continuation pattern that often indicates a brief consolidation or retracement before the trend resumes. This could point to a potential bullish reversal if the market consolidates at these levels and eventually breaks higher.
The Bullish Flag Pattern: A Potential Reversal Setup
The formation of a bullish flag pattern amid the ongoing price action presents an interesting opportunity for traders. A bullish flag typically occurs after a sharp price move and is followed by a period of consolidation, often resembling a rectangular shape or flag. If silver can break through the upper boundary of this flag (the trend-channel resistance at $33.25), this would suggest that the correction has run its course and that bullish momentum could be resuming.
The key level to watch for such a breakout is the $33.25 resistance. A sustained move above this price level would likely lead to further upside and may trigger follow-through buying.
In such a scenario, silver could first target the $33.70 resistance level, followed by the $34.00 mark. If silver manages to hold above these levels, the price could aim to test the March monthly swing high in the $34.55-$34.60 region. These levels represent key price points that traders will monitor to assess the continuation of the upward momentum.
Immediate Support Levels and Bearish Risks
On the opposite side of the market, silver’s immediate support comes in at the $32.40 area. This is the first level to watch for any signs of further weakness. If the price drops below this support, the bears could gain more control, and silver may extend its losses toward the sub-$32.00 region. The weekly low reached earlier in the week, located near $31.70, would also become an important level to monitor. A break below this point would suggest that further downside is likely.
The descending channel support is another crucial level in this technical setup. Currently pegged around the $31.35 area, this support zone is where silver could face strong price action.
If the price falls below $31.35, this would likely be seen as a key trigger for bears, indicating a more significant breakdown. A sustained move lower could pave the way for silver to test even lower levels, possibly extending the retracement towards the $30.00 mark.
A convincing break below the $31.35 channel support would signal a shift in market sentiment and could lead to further, deeper near-term losses. It is important to recognize that such a breakdown would weaken the bullish flag pattern, making it more likely that silver would move into a new downtrend, reinforcing the bearish outlook.
Conclusion
Silver’s price action remains bearish in the short term, with the descending channel resistance continuing to limit upward progress. However, the development of a bullish flag pattern suggests that silver may be poised for a potential reversal if it can break above the critical $33.25 resistance. Traders should remain cautious, as the market presents both opportunities and risks.
A breakout above this resistance would open the door for further upside, potentially leading to a retest of higher levels such as $33.70 and $34.00. On the flip side, a drop below the key support levels would solidify the bearish outlook, opening the door for further downside. Monitoring these levels closely will be crucial in navigating the silver market in the near term.
