Saturday, May 19, 2007

Where Do You Draw The Line?


For this installment of "Where Do You Draw the Line," we will examine a one-year daily chart of SLV, the silver ETF. On a side note, if you want to print out some very helpful ETF Guides, check out Bespoke, a very well-done blog.

I should explain that I haven't been keeping up with the current fundamentals of Silver. Maybe The Ducati can help with that.

MDawsz at Get Short posted a chart of SLV, and ruminated that the possible long-term trendline might be broken, He also pasted a link to this article which mentions that it looks as if a Head and Shoulders Breakdown has formed.

It is late and I am bored, so what the heck. I can draw some lines on charts.

My lines show SLV price at a critical junction. On Thursday, SLV pierced both its H&S breakdown line as well as the long-term trendline. On Friday, it reversed and closed back above both lines. Recently, there has been above-average volume on the down days, and very little volume on the green days. However, MACD is not showing the move down to possess a great deal of strength.

What I like about this chart is that the bears can argue the trendline was broken, and the bulls can counter that SLV closed on Friday back above the trendline.

What I hate about this chart is that many of the candles have long tails. If one chooses to draw the lines only through the bodies of the candles, then the chart will show SLV breaking its trendline last week. This ambiguity makes the trendlines less likely to be firm price points; instead, such trendlines become areas around which the price might hover.
While this chart, like many, is ambiguous, a close below Thursday's low would confirm the recent downtrend.
It will be interesting to see how this techincal picture develops.

9 comments:

Woodshedder said...

M- sorry to hijack your post. I started messing around drawing lines and got carried away.

Dogwood said...

I would qualify the question with long-term trend or short-term trend.

Generally speaking, I don't care what the price has been doing for the last year or two if my goal is a 10-day swing trade.

If I'm looking for a long-term, multi-year investment, then the long-term trend line is more relevant.

What I'm finding out is there are no right ways or wrong ways, rather, just different ways that work for different people based upon their personal trading or investment styles and goals.

Woodshedder said...

Good points Dogwood. I like that because it leads back to what I'm working on, which is determining exactly the time frames that I want to trade so that I can design my system around it.

grant said...

Woodshedder,

Now I understand, kind of a three way analysis tag-team over the weekend.

Good idea, I'll have something by this evening NZ timezone, have to do some research first.

jog on
grant

Dogwood said...

Settling on a time frame was one of the harder decisions for me to make.

I understand that long-term trends can be incredibly profitable, but on the other hand I get bored easily and I want to learn how to day trade, but on the third hand I don't want to over trade.

My solution, cut the baby in half, or rather into thirds. Two-thirds of my account is used for long-term trend following, and one third is in an account at Interactive Brokers for day and swing trades.

The long term system can hold stocks for weeks, months or years, while swing trades last a couple weeks.

I haven't perfected either system yet, but this approach seems to be meeting the psychological needs of my trading as well as my time constraints.

brent said...

What do you guys think of UVE. I haven't done a lot of research on the company as of yet, but look at those margins and that cash position. I started following it a couple months ago under $4 bucks and it is now trading @ $6 but it still looks cheap based on its financials. I will do some primary research and see what I can find out.

Anonymous said...

Howz about this stock?

LGBT

grant said...

Woodshedder,

THE book for understanding and designing mechanical systems is;

"Designing & testing Technical Systems by Perry Kaufmann"

This is apparently the "Bible" of systems.

jog on
grant

Cruxmonger said...

That is a titties ETF chart. Thanks!