SIH12

Yesterday's peak at 29.205 created a bullish impulse leg on the hourly chart -- and a bit of camouflage as well. The pattern is shown in the accompanying chart, with a buy signal at 28.875 that would have implied far too much entry risk -- $900 in theory -- for us to have used bars of hourly degree. (Pop quiz for camouflageurs: Can you find a better, cheaper way in on the five-minute chart?) Because the 29.000 midpoint pivot has been exceeded to the upside, we should infer that the pattern will complete to its 'D' target at 29.250.  If not, bulls are more enfeebled at the moment than we might otherwise have suspected.

March Silver spent the week backing and filling following the 14% rally that has kicked off the New Year.  Remaining patient is our only option at the moment, but we can still use the 30.215 'external' peak shown in the chart to tell us when mere noise is starting to sound more like the fearsome snort of a resurgent bull. Camo traders should stick with micro-risk plays on the 5-minute chart, since this vehicle has been creating new point 'C' lows as though every silver trade out there is all too eager to buy.  Want to learn how we use Hidden Pivots and "camouflage" to reduce entry risk to relatively small change? Click here.

I identified a Hidden Pivot at 30.120 here yesterday as a minimum upside objective, but yesterday's price action lends more weight to another pair of pivots -- they lie, respectively, at 29.755 and 30.825 -- that will probably play a larger role over the next few days. The provenance of both is shown in the chart, and it will undoubtedly take some diligent attention to the 15-minute chart to exploit the anticipated move without risking much.

Unlike gold, silver's thrusts have been unambiguously impulsive on the lesser charts, suggesting it will lead the way (as well it should, since silver has a lot more lost ground to make up from 2011). We can use the 30.120 Hidden Pivot shown in the chart as a minimum upside target for now, predicated on a decisive push above it 'p' sibling at 29.520. That resistance was exceeded yesterday by 2.5 cents, tipping my bias for Thursday bullish.  Night owls should notice that, at press time, the futures were working on a bullish 'camo' pattern projecting to 29.600.  On the 15-minute chart, A=29.120 at 8:30 p.m. EST, and B=29.440.

Unlike February Gold, this vehicle is within easy distance of negating a target 40 cents below the recent bottom at 26.145. However, a much lower target at 18.355 is still in play, and we also need to take into account that the rally so far is not especially impressive considering that it was catalyzed by a viciously false breakdown beneath September's neon low, 26.185.  On balance, we can trade the minor rallies but use tight stops.  Just such an opportunity could unfold Tuesday night or Wednesday based on the pattern shown. The implied entry risk would be $1500 per contract on the 120-min chart (25% of A-B x $50/1 cent), so you'll need to zoom down to a chart (end entry pattern) of lesser degree when the big-pattern 'X' is about to trigger. _______ UPDATE (3:11 a.m. EST): A pattern very similar to the one I sketched triggered a 29.410 'X' entry signal at around 2:10 a.m., but executing the trade on the 1-minute chart would have produced an unacceptably large loss of 2.5 cents per contract, or $125. Entry would have come off the pattern A=29.400 (2:47 a.m.); B=29.465 (2:48 a.m.), C=29.435 and X=29.455.  A lower, second point 'C' at 29.420 (2:53 a.m.) yielded a solid winner that would still be live, but strictly speaking, 'camo' trades should work on the first try or we don't do them.  The next valid entry opportunity -- and winning trade -- would have come at X=29.495 (3:00 a.m.), but I'll let you discover the details so that you can learn from them. Swimming with the sharks in the wee hours needn't be scary.  If you're a night owl looking to make the most of the excellent opportunities that frequently occur when most traders are asleep, click here.

Like gold, silver has begun the New Year with an unimpressive rally -- up 25 cents at the moment.  The thrust would need to tack on an additional 63 cents to turn the hourly chart bullish, since that's what it would take to breach an 'external' peak at 28.790 recorded last Wednesday on the way down.

Yesterday's selloff made short work of an ostensibly solid Hidden Pivot midpoint support at 27.018 pivot, lending authority to its 18.355 sibling.  A 50% fall from here is not yet a done deal, although the futures are almost certain, at the very least, to breach late September's 26.185 low before they find traction. It could prove fleeting, but I would expect a bounce of at least $4 over a period of 3-5 days if bulls are to be given a fighting chance. Keep in mind that the bounce would be occurring with relatively few profit-takers aboard, since most bulls will have gotten shaken loose by the feint beneath 26.185.  If this rally were to fail to generate a bullish impulse leg on the daily chart (a feat that would require an unbroken sprint from 29.135 to 33.305), then we should prepare for the worst.

A bearish target at 27.018 previously noted here remains my minimum downside objective. I would strongly encourage buying there, especially via camouflage, but if the hidden support is decisively breached, be aware that its 'D' sibling lies all the way down at 18.355.  A fall of that magnitude would not be an odds-on bet at that point, but it would place the burden of proof on bulls every time they get a minor rally going, since impulsive failures would be especially telling. An alternative pattern (where A=40.690 on September 21) yields a somewhat less disastrous worst case, since the relevant 'D target is 21.175.  Its 28.425 midpoint has been exceeded by 30 cents, however, and that is of course bearish.

A bottom-fishing setup similar to the one I've featured in today's gold tout is where night owls should look for action. The 'p' midpoint where you can attempt it lies at 29.045, and you may use either camouflage, or more dangerously a three-tick stop-loss. The futures would be signaling further distress over the near-term down to as low as 28.505 if the midpoint support is easily breached. If you'd prefer trying to short this vehicle, the 15-minute chart holds some enticing possibilities. Check out the inset if you want to see a subtle one that was developing shortly before 10 p.m. EST. _______ UPDATE (1:59 a.m. EST):  The midpoint bounce we were expecting came at 10:00 p.m. from a single tick above the 29.045 pivot, so officially --and by a hair -- we did nothing. The 15-cent rally that ensued would have more than covered the three-tick stop-loss, but it was not to be. The futures subsequently relapsed to a so-far low tonight of 29.010, but there was no reason to have looked for 'camo' opportunities, since that number is Nowheresville relative to the 28.785 'D' target tied to the one-off 'A' shown (though not labeled) in the chart.