Using a Pitchfork to Mine Silver
- Posted by Greg Harmon
- on March 10th, 2011
Silver has been rising steadily since the end of January. It is now at over 30 year highs and keeps going. How can you determine where it might end or stall from a technical perspective. Following oscillators and indicators that can flash overbought but remain at that state for a very long time before any correction don’t help much. But there are many tools to help estimate the extent of a move. You could use Fibonacci extensions, Elliott Wave rules, Measured moves, Bollinger band breaches. Or you pull a new tool from the shed, Andrew’s Pitchfork.
Below is a chart for the Silver ETF, $SLV (the same analysis can be used for the Silver Futures, $SI_F, and is shown at the end of the article). The Andrew’s Pitchfork is prominent in blue on the chart. The two outer Tines known as the Upper Median and Lower Median Lines, mark the support and resistance. Those together with center tine, the Median Lin,e mark the channel. As price clears one Median line Andrew’s claimed it was attracted like a magnet to the next one. Often traders who use the Pitchfork layer multiple Pitchforks as trends reverse, but no opportunity for that on Silver yet.
From this chart the price has fallen from the middle of the Upper Median Line toward the Median Line. Today it got pushed toward the Median Line but held at the rising trend line in brown. As that trend line pushes price through the middle of the channel the price should then become attracted to the Upper Median Line. Following the second brown trend line from the beginning of the initial move from August and extending it higher we can estimate the first point where price might hit the Upper Median Line at 38.25. The second brown trend will cross the Upper Median line at 40.25. This puts a target for the move higher, given the price holds the first trend line during this consolidation. Should the price fall through the trend line, then it could drive to the Median line between 33.50 and 35.25. This is the equivalent to a range from a straight fall from the trend to the Median Line a continued sideways movement from earlier in the week to meet it. When and if it drives through the Median Line then look to the Lower Median Line for the next target.
The chart below for continuous contract Silver Futures has the same Pitchfork and trendlines as the SLV. The target range for Silver Futures to hit the Upper Median Line is between 39 and 41. The target range for a move back to the Median Line is 34.25 to 36, using the same methodology.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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