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Talking Points

-Bond yields are dropping producing a good environment for silver prices

-A close above $19.45 creates the largest 3 day gain since October 2015

-Risk can be set near May 2 high of $18.04

Silver prices are trying to produce its largest 3 day gain since October 2015. The technical patterns point to even higher prices, especially if we close on the highs today.

Silver prices are enjoying this environment of interest rate compression. Said another way, a falling US 10 year and 30 year yield makes silver and gold more attractive as they don’t pay any yield.

During this 3 day spike higher, silver price has surprised to the upside breaking through significant horizontal resistance my colleague Paul Robinson previously identified near $18-$19. This break above suggests more bullish potential.

Silver Prices Attempt Largest 3 Day Gain in 9 Months

Currently, silver prices are processing through an equal wave measurement (listed as the 1.000 level near 19.016 on the chart). This potential equal wave pattern may abate some gains, if only for the shorter term. Additionally, since this is a Friday of a very strong week up trend, we may see profit takers stepping in towards the close of the day so it is not an ideal long position at the moment. However, if these profit takers do not step in suggesting they are comfortable holding over the holiday weekend, then a continuation of the uptrend is the higher probability move.

Much above $19.33 (Equal Wave Pattern Extreme on the chart) and the equal wave pattern is stressed and we can set our sights on the next level of measured resistance near $21.05-21.50. Risk to the immediate bullish outlook can be placed near the May 2 swing high of $18.04. A move below that level creates overlap and begins to negate the impulsive look of the XAG/USD chart.

In summary, a close today above $19.45 produces the largest 3 day gain over the past 9 months. That would also place silver on a Friday high going into a holiday weekend, which is bullish. Lastly, a close today above $19.45 places the metal on the outer bounds of the equal wave pattern. If that equal wave pattern breaks, then it increases the probability of a move up to $21.05-$21.50.

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---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

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