Bearish Flag Continuation (2011-05-22 XAG, SLV analysis)

I received an e-mail asking my opinion on Silver and iShares Silver trust SLV. First thanks very much for your e-mail. I love to share ideas with others which we can learn from each other and so if you have any comments/feedback/questions, please e-mail me so we can further discuss. :)

Back to Silver and SLV. Actually SLV is the ETF for Silver, so the two charts look more-or-less the same.

Daily chart of SLV:


Daily chart of XAG:


The long red line is the medium-term up-trend line, which obviously has little meaning now after the severe huge slump of Silver price in late April.

After the breakdown, it seems like the price is fluctuating a lot. However, by carefully analyzing, I discovered a pattern there.

We can see that when the price boosted, it usually stopped at almost the same level (around $36 for XAG and $34.6 for SLV). While for the downside, the low was rising, forming an upward sloping support there.

Also, the volume was dropping. This is more obvious in XAG chart. All the criteria for a bearish flag continuation pattern are met.

Therefore, I would expect a further drop in Silver price (of course SLV would follow). When the breakdown confirms, it will be a good time to SHORT Silver.