- Silver price may have formed a Bear Flag pattern on the 4-hour chart.
- The pattern suggests a continuation of the bearish trend to targets substantially lower.
- Support from a relic of long-term support and resistance at $25.80 is likely to provide a floor for any sell-off.
Silver (XAG/USD) price may have formed a Bear Flag pattern on the 4-hour chart which bodes ill for the precious metal’s price going forward.
4-hour Chart
After forming a multiple shouldered Head and Shoulders (H&S) topping pattern at the $30.00 highs of mid-April, Silver price declined to the initial target for the pattern at $26.70. This target was the conservative estimate for the pattern, calculated by taking the height of the H&S and extrapolating the distance by its 0.618 Fibonacci ratio from the neckline underpinning the pattern lower.
After bouncing from a temporary floor at $26.70 Silver price has consolidated forming a rectangle pattern. Taken together with the prior sharp decline the whole formation resembles a Bear Flag pattern.
According to technical lore, the expected move down from a Bear Flag equals the length of the preceding “pole” or a Fibonacci ratio of the pole. In this case the pole is the decline that followed the completion of the H&S pattern.
The Fibonacci 0.618 ratio of the pole on Silver, when extrapolated lower, gives a conservative target at $26.31. If Silver price falls the whole length of the pole (Fib. 1.000), however, it will reach a more "optimistic" target of $25.53.
Tough support from a long-term upper range boundary line at $25.80, however, is likely to offer support before Silver price reaches the lower target for the Bear Flag.
A break below the $26.69 low of April 23 would be required to confirm a breakdown of the Bear Flag towards its targets.
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