Large Scale Breakout in Silver SLV - Real or False?
Tue, Sep 7, 7:11 PM ET, by Corey Rosenbloom
While most traders pay much more attention to gold, silver is trying to vie for their attention currently. While gold rallied into a known resistance area recently, silver quietly broke to new recovery – and new 52-week highs. The question now remains – is the breakout real or just a trap? Let’s start with the big picture of the Weekly chart for silver’s tradeable ETF SLV: 
A quick chart glance shows us a very significant ascending triangle formation – drawn with blue price trendlines. Traditionally, triangles are price consolidation patterns that precede breakouts and impulse trend moves. Did silver (SLV) officially break out of the ascending triangle pattern – and if so, are we likely to see a swift rise in Silver prices? That’s certainly a possibility, but let’s look at other factors. First, we have an obvious negative momentum (lower indicator – MACD setting 3, 10, 0) and volume divergence throughout most of the recent rally. That’s a bearish caution sign that gets thrown in the mix. Otherwise, we observe a massive level of support via rising moving averages and trendlines underneath price currently – specifically at the $17 and $18 level. Thus, any price move unexpectedly under $17 would be an official signal that the proposed breakout FAILED, and would expect a lower move. But that clearly hasn’t happened yet. Looking back, price was unable to break free of the $19.00 per share trendline as indicated with red arrows. Breaking free to a new 2010 high, silver has to contend with the established price high at $20.50 made in late 2007 – it would be more appropriate to label an official breakout – and thus expectation for much higher prices yet to come – on a break and close above $21.00 per share. Now, let’s drop to the closer perspective of the Daily Chart of SLV: 
I won’t go into as much detail, but will note the crystal clear – and classic – price breakout (complete with gap) in late August above the trendline at $18.00 per share. Notice the corresponding volume spike – all of which suggested that higher prices were likely yet to come – and they certainly did. This is a good example of how a trendline breakout – when combined with a price gap and surge in volume – is a good trade trigger to expect higher prices yet to come (in other words, NOT a trap). But now, price seems to be having trouble breaking free above $19.50. Keep in mind that price gently nipped to a new high Friday and today – it certainly did not do so with compelling volume or momentum (or a gap). For now, that’s bearish and suggests that the price could fall at resistance. Of course, a clean strengthening in price – leading to a price breakout on high relative volume – would overcome this bit of bearishness. That’s why – if you’re watching or trading SLV – you need to keep a close eye on what happens in the days ahead. It will mean the difference between a further rally and breakout in price – leading even to higher prices yet to come – and a frustrating bear trap that will result in a retracement of this recent move. Watch – and trade – carefully. Corey Rosenbloom, CMT
Afraid to Trade.com Follow Corey on Twitter: http://twitter.com/afraidtotrade
 blog.afraidtotrade.com
SDI Glossary: "CD" Definition
SDI Glossary: "price" Definition
SDI Glossary: "MACD" Definition
SDI Glossary: "TA" Definition
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