- Silver gained positive traction for the third straight day on Tuesday.
- Recent price action formed a bearish flag formation.
- Negative oscillators continue to support prospects for additional losses.
Silver built on its rebound from a nearly two-year low hit last week, gaining positive traction for a third straight day on Tuesday. Momentum pushed spot prices to a four-day high around the $21.85 area in the first half of the European session, although enforcement was lacking.
The intraday uptrend stalled near the 50% Fibonacci retracement level of the $23.24 to $20.46 crash and should serve as a linchpin for intraday traders. However, any subsequent move higher is likely to face stiff resistance near $22.00, which is the top of an ascending channel.
In light of the recent sharp decline, the aforementioned trend channel represents the formation of a bearish flag pattern. Furthermore, the daily chart’s technical indicators are still remaining deep in negative territory, suggesting that the attempted recovery is in danger of stalling fairly quickly fizzle out.
However, a convincing break of $22.00 would nullify the bearish prospects and trigger a fresh push of a short covering rally. XAG/USD could then surpass the 61.8% Fibo. Levels around the $22.20 region and accelerating momentum towards the next relevant hurdle near the $22.55 region.
On the other hand the 38.2% Fibo. The level around the $21.50 zone now appears to be protecting the immediate downside. Closely followed by the ascending trend channel support near the $21.35 region, which if decisively broken will reinforce the bearish bias and open the way for more losses.
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