Bear Flags Galore in Silver SLV

Mar 18, 2009: 1:29 PM CST

Silver (and SLV) took a brutal hit today, and fell at one point 6% intraday.  It provided an interesting structure and lesson in momentum lows and bear flags.  Let’s see it as it’s developing.

SLV (Silver ETF) 5-min chart:

I’ve never seen so many bear flags in a single day (at least not that I can remember).  Each retracement took price back to the falling 20 EMA, where – in all cases – nice little dojis formed which offered excellent, low-risk entries (stop beyond the 20 or 50 EMA, entry on the candle after the doji).

I’ve also never seen such perfect plunges after a bear flag formed.  This is a good day for the record books.

Also, we learn a lesson on momentum – such that New Momentum Lows Precede New Price Lows.

Notice on each of the flags, we had three new momentum lows, which implied that – following a retracement (the flag) – odds favored the actual price low was yet to come.

On where I captured the chart mid-day, we’re seeing a distinct positive momentum divergence into the most recent price lows after 1:00 – momentum is NOT confirming this price low.  So many times actual intraday price lows are formed on positive momentum divergences.  I’d be willing to bet that we’ve put in the low for the day or at least that odds are reduced that a bear flag will form successfully off this recent retracement rally.

Still, just take today’s action as an educational lesson in momentum, “Trend Day,” and bear flags.

Corey Rosenbloom
Afraid to Trade.com

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Comments
  • I'm glad things have turned around and that we haven't seen a pattern like this in a while.

  • Hi,

    Thanks guys for sharing information about Bear Flags Galore in Silver SLV.

  • Anon #7,

    Hey I'm not the world's biggest Elliott Wave defender or advocate. I treat it like I do any other indicator - I don't get upset when the 3/10 gives a false divergence signal or when price keeps going up after an overbought reading in the RSI or Stochastic.

    It's a tool in the arsenal - EW is not absolute, but it gives insight into a possible pathway for price and serves as confirmation/non-confirmation so I find it helpful in that sense.

    I'm just like you - I'm in a "Wait and See" mode.

  • Dave,

    Yup - good call. The last three 'pushes' into the close on GLD formed our "Three Push" reversal structure.

    Again, I'm still trying to sort-out the fallout from these intraday surges.

    Anyone see the dollar (or UUP)? Ouch.

  • Anon,

    I'll try to post up a quick grab of those charts - there was some wild action in those. I'm still trying to sort it all out. I'd wait for the dust to settle before trying to jump in on any of these.

    And usually we get the *opposite* indicator on trend days - usually it shows a false positive divergence. In this case, the oscillator actually confirmed the trend all the way down and correctly identified the low via a divergence. That's also why I chose to put the example up - it bucked the ... trend.

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