This is what can happen when a stock or ETF breaks out of an 8- 12 week consolidation. The inverse silver ETF DSLV was aided by making higher lows and highs, as it crept up that trendline.
This weekly chart of the DUST ETF is just beautiful. I’m going to stick this in my trading patterns section. You had a major support area build up, which was touched three times. You then had a retest of that area, and a green candle off of support the week of March 2, 2012. A retest back to 40.5, which is the horizontal trendline that I drew some time ago. We had four candles up. This is followed by another green candle, which tested the downtrend line. This was followed by a power candle. I cannot emphasize how important these candles are when they begin trend moves. This is followed by two inside candles. This will create a huge move in one direction or the other. Generally, it follows the existing trend. If you’ve read any of my stuff, you know that I favor moves of seven candles from major and minor pivots. We are now seeing the seventh candle blowing off at the top of this weekly chart pattern. Just beautiful. You never know where these will end. They usually will end with a bang as we’re seeing now.
If you must trade against these, I find that it is best to trade the inverse ETF intraday against these longer type of moves.
Remember. The trend is your friend.
It’s now nearing the end of May, and we know what summer brings sometimes – dull and listless trading. With this move in gold and silver stocks and metals, we may be in for a bit of consolidation now.
If you look at the gold and silver charts. They both have major support areas right here around $27 for silver. And $1540 for gold. Now look back at the DUST weekly chart. Imagine if gold and silver decide to consolidate here for four months. Then they put in a green bar and start to trend back up. Can you guess what might happen?