This weeks stock review comes from a new subscriber, flasinthepan, who is interested in SSRI as he’s been holding it for sometime now. Today’s action was not pretty as the stock gaped down 2 points on the opening and didn’t look back. The pattern on the 60 minute chart broke down from an expanding flat bottom triangle. The breakout came on extremely heavy volume giving investors little chance to get out.

SSRI 60 minute breakout.

The daily look is just as ugly as the 60 minute. Note the blue expanding flat bottom triangle that formed just above our smaller one. The thing about either a flat top or flat bottom pattern is that the breakout usually occurs   thru the flat horizontal rail. This stock has been cut in half since it hit it’s high back in April – May of this year. Notice the big gaps that accompanied each breakout from the expanding flat bottom triangles. Also note today’s volume spike.

SSRI daily expanding flat bottom breakout.

The weekly looks paints an even more bearish picture for SSRI. Notice the big blue rising flag that is made up of a rectangle and a H&S top formation. The expanding flat bottom on the daily look is the right shoulder. That H&S top projected down to 15.56 which was below the bottom blue rail of the rising flag. That was your first clue that SSRI might be in trouble. Next notice the backtest which stopped right at the blue bottom rail and was the top of our latest expanding flat bottom. Again another important clue that SSRI was not acting like it should if it was in a bullish phase. I’ve added a brown support zone where the decline may run into some support.

SSRI weekly bearish rising flag.

The monthly look shows all of SSRI’s history going all the way back to 1997. Please note the bearish rising flag has 5 reversal points making the rising flag a reversal pattern. As bearish as the monthly chart looks there is an outside possibility that the whole area from the 2008 high and wherever the eventual bottom is could end up being a huge triangle consolidation pattern, black rails.

SSRI monthly look.

Bottom line with the precious metals stocks is that they are all over the place right now. Some are close to all time highs some are in the middle of their big trading range and some like SSRI, AEM and TRX are breaking down. It pays to keep a close eye on any precious metals stock you are holding. What you don’t want to see is it breaking a support zone like the chart of SSRI did today. Even if you had a sell/stop in place, on the daily chart, chances are today’s gap may have gaped over your sell/stop leaving you still in the game when you might not want to be. The only rule in the stock markets is “THERE ARE NO RULES”.All the best flashinthepan. Rambus

In yesterday’s post, on the Dow, I said I was looking for another backtest to the 11,600 area that was the breakout point of the double bottom. It felt like the world was ending yesterday with all the news on how bad things are around the world. Whenever sentiment gets like that its time to put on your blinders and ear muffs and look to the charts for clues which are unemotional. Its the chartists that is the emotional part of the equation. Yesterday’s big down day was fairly rare in terms of down to up volume. The chart below shows just how panicked investors were. Whenever investors panic like yesterday they throw the baby out with the bathwater and then some realize, after the fact, what did I just do. Now when the markets turn backup they will be sitting on the sideline consumed with fear and will wait for the all clear signal to get back in again which will be at higher prices.  Yesterday’s capitulation spike in, down to up volume, was the 3rd such spike since the bottoming process started in August. Also note the 2010 bottom also had 3 capitulation spikes that showed up during it’s bottoming process. Where yesterday’s capitulation spike was formed was perfect in that it came on the backtest that was much higher than the lows of the double bottom. Sometimes the down to up volume will mark the low and sometimes it will come as part of the bottoming process. So the bottom line is the 11,600 backtest point is still in play and with yesterday’s capitulation spike the odds go up that it will hold. Watch the 11,600 closely

Dow down to up volume capitulation spike.

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In the weekend report I showed a 30 year long term look at gold so you could see the big base that launched it’s bull market. Silver’s huge base is just as impressive as golds. On the chart below the first thing you will notice is the two H&S patterns that formed the almost 30 year base. I’ve labeled the two H&S patterns as Neckline #1 and neckline #2. The lower or smaller H&S base reached it’s price objective of 20.39 just before everything crashed in 2008. During the crash silver found support just above it’s neckline which qualified as the backtest. That crash low in 2008 also created the right shoulder of the much bigger H&S base, NL #2. The rally sliced right thru the NL #2 like butter until it hit 50. Again, like the smaller H&S #1, the price corrected all the way down to just above NL #2, close to the 62% retrace, red arrows on chart below. That  also qualified as the backtest IMHO. The brown area on the chart shows where I was looking for the backtest to stop and just like the lower H&S neckline #1 the backtest stopped just short of a full test all the way down to the neckline. Close enough for government work. The big #2 H&S base has a price objective all the way up to 141.

Silver 30 year base with two H&S patterns

Yesterday was an important day for GLD. A week or so ago I said we needed to get above the top rail of the bullish rising wedge to really turn GLD bullish again. As you can see on the chart below we gaped over the top blue rail of the rising wedge yesterday. This was a very positive indication the top rail is still hot and in play. Take a moment and follow the price action against the top rail of the rising wedge. What you will notice is that everytime we break above or below the top blue rail there is a gap or we just trade up to the blue rail and back off. These are important little clues as to the validity of the top rail of the bullish rising wedge. I’ve marked where we may see one last backtest to the top rail that we broke out of yesterday. If we backtest the top rail, 172 should come into play. That’s about 20 points lower than where we are trading presently. We don’t have to have one last backtest but from my perspective I would love to see us test the top rail one last time, close the gap, and then rocket higher. Either way as long as we stay above the top rail of the bullish rising wedge the bulls will be in charge.

GLD daily bullish rising wedge, gaps and backtest.

This was a volatile week for the precious metals stocks along with the stock markets. Tuesday was a pivotal day when everything was hard down, doing their backtest, to their breakout points. The market quickly recovered and left a long tail on the bar chart signaling there was a good chance the bottom was in.. The weekly chart will show you why the H&S bottom, that has been forming for the last five weeks, is critical to the long term look.

On the chart below you will notice a big blue pattern that is a 2 year rising wedge.. The rising wedge pattern has 2 separate smaller patterns in red. The first one is a triangle that failed to reach it’s price objective and our current one is an expanding triangle.They were both 6 point consolidation patterns. Whenever a pattern fails, like the triangle above, it usually becomes part of a bigger pattern, like the bullish rising wedge is showing now. Also notice the positive divergences on the indicators.The reason I believe this 2 year bullish rising wedge is a big deal is because it could very well be a halfway pattern.  The blue arrows on the chart shows how I would measure it. Think of that big 2 year bullish rising wedge as a running correction. I know it doesn’t feel like a running correction but that, in fact, is what is happening right now. How we inter act with the top rail of the rising wedge will give us some more clues as to it’s validity. All in all it was a very positive week for the HUI. From Tuesday’s low at 539, the HUI gained about 50 points. Not bad for 3 1/2 days work.  Enjoy your weekend….Rambus

HUI weekly look.

Below is a combo chart showing the HUI, Gold and Silver. This chart helps one to see how all three are preforming against each other. What I want to focus on is our most recent bottom and the 3 completely different reversal patterns that formed. The top of the chart is the HUI and it’s H&S bottom. Next is gold and it’s 5 point bullish rising flag and third is silver with it’s 5 point triangle reversal pattern. Even tho each has a different bottoming pattern they have all broken out and backtested together. The purple dashed vertical rail shows the breakout of the 3 reversal patterns. On Tuesday they all backtested their resistance rails, HUI the neckline, Gold’s top rail of it’s 5 point bullish rising flag and Silver the top rail of the 5 point triangle. What I’ll be looking for, from this comb chart, is who will be the first to breakout into new all time highs. Hopefully the HUI will lead the charge higher but its really to early to tell yet.

Combo 6 month daily chart with the HUI, Gold & Silver

Below is a 6 month daily chart for the HUI showing our H&S bottom and how it has interacted with it’s own support and resistance points since the double top made in September of this year. Please note where the initial thrust was stopped on the breakout from the H&S neckline. The double top hump provided just enough resistance to stop the move and reverse the trend down. Now look where the move down stopped. Right on the old neckline that held resistance while the H&S bottom pattern was forming. Once the HUI was able to break the neckline to the upside the neckline has reversed its roll and now act as support. These types of support and resistance areas are nothing more than investor psychology. Meaning all the folks that bought below the neckline are still ahead of the game when the neckline is backtested from the topside. So there is not much selling just above the neckline. The buyers step in and away you go again until the next resistance zone is hit. As long as the bulls are in charge the corrections will be modest.

HUI 6 month daily H&S bottom with support and resistance points.