The Exchange Traded Fund for Silver symbol SLV, had the "Measured Rule" target of a large "Rectangle" pattern fulfilled this week in the Weely timeframe. Pricing patterns, or Support and Resistance levels in the Weekly timeframe are the strongest from a chart perspective in my experience. There is also a potential reversal pattern developing now as well. First the measured rule takes the distance from the top to the bottom of a given pattern and adds that onto the breakdown point. Quite often the supply ends here in a bearish pattern as the weak handed longs have finally been flushed out by this point.
The Rectangle is similar to a "Balance Area" using Auction Market Principles. The rectangle or balance area is a horizontal phase of development, or a picture of value among market participants in a given degree of timeframe. Value is a market that is two sided, or balanced between supply and demand. When the lower extreme of the balance area is no longer seen as an unfair low price to do business, market participants can make the initiative move to sell, and that is when you go from a phase of horizontal development to vertical development, or a market that is "seeking value". Vertical development is one sided price action or a market dominated by either supply or demand.
This week saw a Bullish "Hammer" reversal candlestick in Japanese Candlestick Analysis with increasing volume. This candlestick represents downside price rejection and increasing demand. With follow through next week to the upside with another week of increasing volume and bullish price action, this would increase the probabilities for a change in trend in the big picture.
There has not been much to be excited about for the Bulls in quite some time in the precious metals, but their spirits should start to lift is there is confirmation of the Hammer next week.
(Click on chart to expand)
Join me on Twitter or Stocktwits or Linked In @ Scott Pluschau
About the author
