SLW: Ascending Triangle Breakout

SLW has experienced a rather wicked decline, coming off the Nested Symmetrical Triangle that had a Double Fakeout/Breakout, then "morphed" (changed) into a Bearish Rising Wedge that broke down at 44.44 on April 11, 2011 (best seen in the next chart).

That was followed by four more pattern breakdowns (see the five red arrows) and seven of the eight downside targets got MADE. The last target of 29.28 fell short: the low, thus far, is 28.79, so overall, the pattern targets did a very good job of aiming us in the right direction.

Yesterday, SLW broke out of an Ascending Triangle to the upside, putting a target of 37.43 IN PLAY. Interestingly, that target is very near horizontal resistance at the last highs: (1) the top of the Channel (37.20); and, (2) the high of the last Triple Top (37.67), so the breakout suggests that "it wants to get there," to those highs.

Notice that the rising trendline of the Ascending Triangle was validated as support, prior to yesterday's upside breakout. SLW violated it by only a few pennies, then rallied into the close on a Bullish Hammer (confirmed as bullish by the upside breakout). Ms. Market said, "Yes, that trendline IS valid support, and I'm following it up with a technical breakout." That's an important trendline and we shouldn't want to see it get taken down, like the rising trendline in the Nested Symmetrical Triangle did, at 44.44, on April 11, best seen in the next chart.



On April 5, SLW broke out of a Nested Symmetrical Triangle, meaning that there was a smaller Symmetrical Triangle (in purple) "nested" within the larger one (in blue). The stock faltered at the top of the pattern, closed below it, then broke out again on April 10. April 11 was a deadly candlestick. It not only broke the rising trendline, confirming a "morph" of the Double Symmetrical Triangle into a Bearish Rising Wedge (that pattern is best seen in the first chart above), the candlestick was a rather ugly Bearish Engulfing pattern that engulfed the three prior breakout candlesticks. UGH.

In this chart, I created a trendline that is parallel to the rising trendline in the Ascending Triangle and placed it at the top of the pattern to illustrate what a "morph" into something bearish could look like. The next high wouldn't need to hit that parallel line exactly, but if SLW reverses down from yesterday's high, or makes a high near that top trendline, at #4, then reverses and takes out the validated trendline at the bottom of the Ascending Triangle, that would negate the bullishness of the Ascending Triangle breakout. Just something to watch for.

Also watch for SLW trading back below the 33.61-33.64 top of the Ascending Triangle. If it does, that's "The Knuckle-biter," leaving us to wonder if SLW was sincere about the bullish breakout. It wouldn't necessarily be bearish. SLW could do that and then break out again, but in the interim we're left wondering, thus, "The Knuckle-biter."

Those are "watch your back" concerns of which we always want to be aware with any breakout or breakdown. "How and where could this go wrong?" As the chart stands, SLW is short-term bullish with an Ascending Triangle breakout target of 37.43 IN PLAY.