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.