Technical Analysis


  • Silver Ascending Triangle Consolidation.  Below we show the spot silver price from 2020 through today. Note how silver is once again making its third functional test of the 2020 and early-2021 peaks (black arrows). This resistance zone for silver exists in the $28.00 - $30.00 range (black lines). Note, too, how the most recent bottom for silver has occurred at higher prices (blue arrows): the first bottom occurred on November 29, 2020, at $21.88 per ounce, while the most recent low occurred on March 30, 2021, at $23.77 per ounce. These higher lows now form a trend of rising buying interest in the silver market (blue line). When we have a flat zone of sellers and a rising zone of buyers in a market, such represents a consolidation known as an ascending triangle. The pattern is plain to see on the chart below. Ascending triangles have a fairly reliable target projection, which may be calculated based on the widest amplitude of the consolidation, then added onto the breakout point. In this case, the amplitude of the triangle was $8.40, which, added onto the February peak of $30.05 reveals a target of $38.45.What is a realistic timeline for silver to break above its resistance zone and then to achieve the $38.45 target?
  • Ascending triangles tend to resolve between 2/3 to 3/4 of the time from the first peak to the apex of the triangle. As this consolidation began in August 2020 and has an apex in May 2022, we project in the highest probability that silver will break out between October – November of 2021. From there, it should be a rapid 1 – 2 month acceleration toward the $38.45 target. Inflation statistics should remain high and accelerating this entire time.

  • Midpoint Danger Stops (MAL). The Midpoint Danger Line (MDL or MAL) stop is appropriate in a staircase step sequence trend and considering how rhythmic the downtrends have been in the precious metals I thought it would be a good time to review it. [MDL = MAL = midpoint danger line = maximum activity line]
  • In a staircase step sequence downtrend, we observe a series of ranges one below another. That rhythmic movement of distributions followed by a fresh breakdown is deleterious to sentiment. The people making money in such an environment are short-sellers who are selling into rallies. When they look at the best opportunities to increase their positions they will observe that prices encounter resistance at the lower side of the overhead range so that is the most opportune time to sell.

    In a downtrend, most people will have stops just above the most recent lower rally high. If that level is surmounted a sharp rally can ensue on short covering. Therefore, the first signal of a change of trend is when a rally pushed back up into the overhead range. That means the strategy which worked best in the downtrend is no longer working. If the price then moves beyond the midway point of the overhead range, a failed downside break is evident.

    A rule of thumb from The Chart Seminar is that in a failed downside break when the dynamic of the failure is greater the dynamic of the breakdown, the price is likely to rally right back up to the upper side of the range. In a downtrend that is where it is reasonable to assume the majority of stops reside.

    Platinum has been trending lower in a staircase sequence fashion. It rallied back up into the overhead range today but has not yet crossed in the midpoint of the overhead range which is at approximately $825. A sustained move above that level would enhance the potential for at least a reversionary rally back up towards the trend mean.

  • hammer

    A Hammer is a short-term candle formation. A Hammer needs confirmation or a follow-through and must be seen as a WARNING of a potential trend change only.

  • Gaps and Break Away Gaps: One place we are already seeing “gaps”, many in fact, are the technical analysisgold and silver mining stocks. Since the beginning of the year, there have been four or five instances where these gaps have occurred. Under “normal” circumstances, almost all gaps get “filled”. Meaning the asset in question will ultimately trade back to the gap levels and “fill” in the chart. We are however in no way living in “normal” times and the current and coming gap openings will be huge and never be filled.  Think of gaps as mini tremors leading to the massive tectonic shift. Gaps will display the coming psychology where demand cannot meet supply in any fashion (or vice versa). The final “gap” will be the closure of the markets for days or even weeks. The reopening of markets, in my opinion, will be unrecognizable pricing. In other words, the “reset” will have occurred! If the reset of asset cross pricing has not gone far enough, another closure will occur and the process continued until supply and demand finally come into balance with a true clearing price. Governments and central banks will be totally overwhelmed in their efforts at “showing” you how things are. It will then become apparent to everyone how things REALLY ARE!


  • Point-and-Figure charts probably produce the most boring commentary for non-familiar readers to digest. Even though they are not as exciting as momentum charts which can tell you almost anything you want to hear, the advantage of point-and-figure analyses is that it is the most objective type of technical analysis. One would be well served to consider that more often than not, intermediate-term investments that go against the PF analysis lose money. These charts send out “buy” or “sell” signals and there is no room for subjectivity. Although they are objective, as with any other technical analysis method, they can be late or produce whipsaws. It is at times such as this when PF charts are the most useful because they are clear, objective, and unemotional. (While today’s markets are totally emotional.)
  • One of the characteristics of a Point & Figure chart is that it shows accumulation and distribution patterns. The larger the distribution pattern, the bigger the subsequent potential move. There are different ways to calculate objectives. One is to measure the MAL (maximum activity line) and multiply it by 2 or 3. This calculated distance is then set out on top or below the MAL line.

  •  A Bear Trap:  a false signal that the rising trend of a stock or index has reversed when it has not.

  • A Bull Trap: a false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.

  • Dead Cat Bounce: a temporary recovery from a prolonged decline or bear market, after which the market continues to fall.

  • Bullish and Bearish Triangles are most of the time very reliable HUGE accumulation or distribution patterns. This is how the bearish triangle looks like for the Euro-Index (Feb 2015). XEU_pf1
  • Backtest: a test of Breakout/breakdown level and confirmation of the breakout of breakdown.
  • Technical Correction: a decrease in the market price of an asset or entire market after extensive price increases. A technical correction occurs even when there is no evidence that the increasing price trend should cease.

  • A slingshot reversal is a reliable trading pattern and is defined as a false breakout + reversal and occurs when a major support or resistance point is broken but the price does not hold below support or above resistance and moves back into its previous trading range.

  • Shaven Head: applies to candle charts. A bullish pattern during a downtrend & a bearish pattern during an uptrend.

  • Cup and Handle and/or Multiple cup and Handle. A strong reversal signal.

    • RSI (Relative Strength Indicator) and (full) Stochastics can be excellent trend reversal spotters. However, one must take into account that the RSI or Relative Strength Index must be interpreted in a different way depending upon the cycle. In other words, in a SECULAR BULL market, the RSI will seldom break below the 50 level. In a SECULAR BEAR MARKET, the RSI will seldom break above the 50 level. In other words, an RSI below the 50 level in a Bull Market is a Buy signal and an RSI above the 50 level in a Bear Market is a Sell signal. Stochastics show similar characteristics. In interpreting the RSI, we note that bear markets are generally contained between the 60-20 levels on the indicator while bull markets will run generally between 80-40.

      During a bull market, the price will run higher on strength, then experience a retracement during which it will usually not exceed 30 on the downside level before moving back higher in the direction of the longer term trend and going on to make new highs. The opposite is true for a bear market. The price will fall as selling pressure amplifies and take the RSI down to near the 20 level only to experience a bout of short covering that takes the RSI back up to near the 60 level before fresh selling takes over and another down leg commences.

    • The Moving Average Convergence/Divergence (MACD) is one of the simplest and most reliable indicators available. MACD uses moving averages, which are lagging indicators, to include some trend-following characteristics. These lagging indicators are turned into a momentum oscillator by subtracting the longer moving average from the shorter moving average. MACD centerline crossovers occur when the faster-moving average crosses the slower moving average and hereby generate a sell or a buy signal.

    • Divergences between the price evolution and the RSI, Slow and Fast Stochastics are also important additional indicators. There are POSITIVE and NEGATIVE divergences.

    • The Stochastic Oscillator is a momentum indicator that shows the location of the close relative to the high-low range over a set number of periods. According to an interview with Lane, the Stochastic Oscillator "doesn't follow price, it doesn't follow volume or anything like that. It follows the speed or the momentum of price. As a rule, the momentum changes direction before price." As such, bullish and bearish divergences in the Stochastic Oscillator can be used to foreshadow reversals.

    • French Curves like Gold. A French curve is a mathematical formula that works rather well on Gold and currencies. It acts as a long term support line and at the same time, it shows the (potential) parabolic acceleration.  Penetration of the French curve would light up a caution sign.

    • Falling wedges are more reliable technical patterns. The price tends to break out of the wedge once 2/3rds of the wedge has been built.

      top megaphone eGold_pf3 bottom megaphone
    • A Golden Cross-over or Positive Cross-over is when the 50 Day Moving Average (50D), moves above the 200 Day Moving Average (200D). When the fundamentals are supportive, the most bullish phase in any stock or commodity is when the 50D has made a Golden Cross-Over and the two moving averages (50D and 200D) are rising.  The cross-over has to be in synchronization with the fundamental direction, otherwise, the trend will be short-lived.

    • Head and Shoulder patterns can sometimes be tricky. They can fail. However, when the pattern is correct, the price objective is measured as the distance between the top and the neckline.

    Buy and Sell formations/signals (click on thumbnail to enlarge)


    Market cycle model. (click on thumbnail to enlarge)

    Market Cycle Model 

    Typical Small Investor's cycle: see investing for dummies.

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