Swing traders understand that they need to capture the majority of the price move between consolidation pattern in order to be successful. They also understand that markets need to build energy, before a breakout, in order to continue a trend. One of my favorite energy patterns is the A-B-C continuation pattern and it has just appeared in the December Silver futures contract, with a reaction swing in the center. The pattern began with the high close on August 6 that was followed by three lower closes that lead to a  low pivot on August 11.  The following corrective rally ended with a higher close on August 17, but failed to take out the intra-day high of the prior swing high. (Therefore, it did not trigger a bullish reaction swing buy signal.) However, the market did trade lower to post three lower closes  once again, before the “inside day’ on August 23.  The market was in balance, following the bullish TR swing pattern, and building energy for pending breakout. However, the real trigger for a possible bullish run, occurred early in today’s (August 24) session. Silver traded below the prior swing low as well as the low of the “inside day” . Silver was unable to find any new sellers at this level and the shorts sellers quickly realized they were in trouble.  The shorts began to cover. Silver reversed and traded above the high of the “inside day” completing one of my favorite entry patterns. Silver continues to rally on increasing volume and appears poised to test the recent high.

To learn more about these types of swing trading strategies go to www.tradersnetwork.com

December Silver

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