Silver Price Analysis: Continues lower after Bearish Engulfing

Silver price (XAG/USD) is trading in the $24.580s on Friday. It has just reversed after touching the top of a multi-month range. 

Silver rallied up during the first half of March until it reached the ceiling of a long-term range at around $25.750. At that point it reversed and formed a Bearish Engulfing Japanese candlestick pattern on the following day, Mar 21 (circled). 

A Bearish Engulfing is an indicator of a short-term reversal in price. It forms when a red candlestick’s whole daily range completely encloses, or “engulfs”, the previous day’s range. The appearance of the pattern adds a further bearish hue to the picture. 

Silver versus US Dollar: Daily chart 

The Moving Average Convergence/ Divergence (MACD) momentum indicator has crossed below its signal line, giving a sell signal. The MACD is an especially reliable indicator within range-bound markets and adds credence to the bearish view. 

The pair will probably continue south to a potential target at the cluster of major moving averages, in the lower $23.000s. The topmost is the 100-day Simple Moving Average (SMA) at $23.550. 

A break below the $24.320 levels of March 27 would provide more bearish confidence of a move lower.  

Alternatively if bulls take back control, a break back above the $25.770 highs of Thursday would probably indicate an extension of the uptrend. 

A decisive break above the range highs would indicate more upside. Such a move would be expected to then reach a conservative target at the 0.618 Fibonacci extrapolation of the height of the range from the breakout point higher, and a target at $28.524.

A decisive break is one in which a level is breached by a long green candlestick which closes near its high, or three green candlesticks that break above the level.