(Click on charts to enlarge, then click again for further enlargement. Use back arrow to return to narrative).
One year Ichimoku Kinko Hyo ("At A Glance...The Table Of Balance") chart for Silver Wheaton (SLW). It's a thing of beauty, particularly the Bullish Inverse H&S pattern that the Bulls pulled off in early 2011, to regain control of the Kumo (Cloud).
In last week's trading, on April 4, SLW broke out of the little Purple Symmetrical Triangle that is "nested" within the larger blue one, but it didn't hold on a closing basis and a gap also was left on the chart.
April 5, SLW started down to fill the 43.47 - 43.66 gap, but The Bulls stepped in ahead of the gap fill and rallied SLW to a DOUBLE breakout of the Nested Symmetrical Triangle, and the breakout held on a closing basis.
Percentage-wise, stocks that break out of a triangle beyond two-thirds of the way to the apex have a higher failure rate (I think that's Thomas Bulkowski's research, but I'm not sure if I'm giving proper attribution). SLW's breakout was about three days beyond the two-thirds marker. I view that as a slight defect, so maybe just be a little "extra" vigilant.
April 6 was a "Gap And Crap," but SLW held the breakout on a closing basis.
April 7 was a "knuckle-biter." SLW closed back inside the nested triangle. UGH. We never like to see that because, obviously, it calls the validity of the breakout into question, suggesting that it "could be" a Fakeout/Breakout. There's no rule about whether or not to hold a stock that behaves like that. Some players will throw it in immediately (can't blame them) and wait to see if it breaks out again and holds the breakout of a closing basis. Others will give it another day or three below the breakout before throwing it in. Others will wait for rising trendline Blue #2 -#4 to get broken. All of those are individual decisions.
April 8 - The Bulls redeemed themselves and took SLW to both new print and closing highs. If SLW should retest the breakout again (Trendline #1 - #3), we shouldn't want to see another CLOSE back below that trendline. It wouldn't necessarily be fatal, but personally, I haven't any patience with that kind of sloppy breakout when I'm long a stock (I've never played SLW, but I might this week).
When we're long a stock, we always want to look at the case for The Bears (vice versa, if we're short). The Bear case is that this is a Rising Wedge, or what E-Waves call "an ending diagonal."
It's very deceptive because from Purple Data Point #1, SLW has made "a higher high and a higher low," which we're all taught is a "good thang," but it ends up not being a "good thang" at all if/when Purple Trendline #1 - #3 gets broken to the downside. I've put the data for the slope of that trendline on the chart so that anyone interested can monitor it.
The questions marks at Purple #4 are because we don't know yet if the upside targets for the Nested Symmetrical Triangle will get MADE, or if that pattern is going to "morph," or change, into this Bearish Rising Wedge possibility. The key to that answer is Purple Trendline #1 - #3. If it gets violated to the downside, especially on a closing basis, that would suggest that SLW has "some" downside beyond that. The first two objectives for The Bears would be a fill of the 43.47-43.66 gap, then a test of the 42.27 low of Purple Data Point #3.
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