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What’s inside:

  • Silver prices fake-out breakout from triangle formation leads to…
  • A broader pattern
  • Waiting for another confirmed break above or below the top or bottom-side of pattern

The title of yesterday’s commentary was, “Silver: Price Action Contraction Points to Explosive Move, Again”. And while the chart has been altered a bit since then, we still stand by the notion we will see a strong move soon as the symmetrical triangle we examined has enlarged, but still maintains its integrity as a ‘good looking’ pattern.

The development and eventual break of triangles can be tricky at times – silver currently an excellent example of the difficulties these patterns can present. The configuration we had chalked up had a fake-break to the upside into 19.20 resistance, resulting in no reason to execute (closing 1-hr reversal bar back inside of pattern), but the subsequent break lower did (closing 1-hour bar outside of pattern). The caveat was the break occurred into a trend-line extending back to the 8/28 low. Silver found support at this trend-line and bounced back up into the previously drawn triangle, but not all was lost. It kept alive an even broader pattern.

And so it is today, silver is quickly approaching the apex of the broadened triangle. The lower trend-line which makes up the pattern also consists of that trend-line which held as support yesterday; this makes for a less likely chance of seeing another fake-out breakout should we see resolution to the downside. Key word is should. It could at this juncture end up breaking out to the upside as it did back at the begining of the month. So, as per usual, we will wait for another confirmed break of the pattern before taking action.

Silver Prices: Triangle Morphs into Larger Version of Itself, Wait for the Break

The measured move is still the same as it was yesterday as the height of the pattern has not changed, roughly 55 cents above or below the top or bottom-side trend-line. A breakdown would bring the 8/28 low at 18.37 into the discussion. A break to the upside will again quickly find silver up against that 19.20 level, so it will make momentum perhaps a bit more sluggish until it can hurdle that important level towards a measured move target in the 19.50s.

Hope is not a good strategy, but here’s to hoping anyways that we see a clean break one way or another.

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinonFX.

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