Bearish pattern of the day - Silver

Scott Pluschau
Monday, April 23rd

Silver has formed a "Descending Triangle" on the daily chart. A descending triangle shows decreasing demand and an increase in supply with each rally off of a fixed level of horizontal support. When the demand at that level has been depleted, the floor underneath can collapse with new supply (those who were long in the current open interest throwing in the towel) and old supply (the previous sellers piling it on to make it hurt good).

We are below the "High Volume Node" on the daily and the 1 hour chart. Putting on a a long or a short position right here with my methodology is playing with fire.

False breakdowns are the strongest signals, but I wouldn't count on it happening. It will take strong hands to put Silver back up, which could be a very bullish signal, but I would first wait and then react. The path of least resistance will be lower on a breakdown and my trade plan will only be to the short side AFTER the breakdown until the auction has changed. Being early or anticipating a move before there is a confirming signal is a good way to lose money. Likewise the more bearish it looks, and things don't follow through, the more bullish a trading signal will be to go the other way at the appropriate time.

Where would I buy if there is no follow through to the downside on a breakdown? Extending the upper trendline would offer a good entry signal on the breakout to the upside from there in my opinion at this time. Again, wait and then react. I am not about predicting, guessing, or being early. I want the greatest probabilities measured to the reward-to-risk.

(Click on chart to expand)

I do my best to tweet out my posts promptly on twitter/ScottPluschau