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Descending Triangle Pattern on Weekly Silver Chart Suggests Continuation of Drop

April 14, 2013 at 15:18 by Vladimir Vyun

Silver is falling, following other precious metals, including gold, and the descending triangle pattern, which formed on the weekly chart, suggests that the drop should continue. The pattern indicated by the yellow lines. The bottom line indicates the support level, which the price was unable to break so far. The price was bouncing from that level, attempting to rally, but failing every time. The failed rally created a string of lower highs, showed by the top yellow line. The descending triangle pattern is considered to be a continuation pattern as it suggests that the price will continue to go in the established direction (down) should a breakout occur (if the price falls below the support level).

The cyan line indicated a suggested entry point for positions in case of a breakout. This level is derived by taking the range from the bottom of the triangle to the high reached on September 30th and subtracting 10% of this range from the bottom of the triangle. It is recommended to take profit at the level indicated by the green line, which shows the closest support level.

Such pattern has already formed last year, but a breakout did not occur. It is important to note: that time the pattern occurred after a strong rally to the record high. Still, the price was experiencing weakness since than, making it easier for a breakout to happen this time.

Click the image to enlarge it to a full-size screenshot:

You can download the MetaTrader 4 chart template for this pattern.

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