SLV breakdown at $20.50, or FALSE Breakdown with Capitulation Occurring?

For those unfamiliar with the WallStreetSIlver thread on Reddit, I posted this same article over there today. It’s a group of investors focused on silver for many reasons, with lots of great analysis and interesting opinions, I would suggest everybody check it out and bookmark it, as its one of the fastest growing groups on Reddit. Here is the link.

When I started out as a trader about 25 years ago, one of my “mentors” (ie. trainers) in my firm taught me to always assume support and resistance will hold, vs be broken in a continuation pattern. Of course, support does not alway hold, but he taught me that even when a trendline breaks, its not usually followed through with lower prices, more often than not the trendline is more of an area than a definitive line in the sand. Some have said we should draw trendlines with a fat crayon, rather than a pen, because we can blow through support and get many investors shaken out just before prices turn higher and run. I mention this with the WEEKLY chart of SLV I post below. I have seen many around the internet pointing to this chart suggesting its nothing but downside for SLV now, but I recall what me mentor taught me, and I am sure he would be a BUYER at the new lows rather than a seller if he were to take a trade. This is not at all a commentary on the fundamentals of silver, which most here would agree are very bright, this is just about how we interpret lines when they are crossed, so lets see what happens as I am typing this we are still well below the $20.50 “line”, if I am correct we are more likely to see SLV rocket back over that level and higher over the next few days or a week. Even if SLV goes lower over the next day or two, which I tend to think is unlikely, it should be back above that breakdown level 70-80% of the time. Let’s watch!

Here is the simple chart, like Patrick Karim of badcharts.com, I have found charts are most useful when kept simple…