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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