5/8/2018 Unorthodox Candlesticks Patterns Foretold The Decline In Silver

The price of Silver peaked in April 2011 at nearly $50 per ounce. Since then, the price has declined in stair-step fashion to a low of
about $16.68 on October 3, 2014, representing a loss of 66.5%.

At the time of writing, the print media is rife with discussions about the recent part of this extreme selloff – the part which began in
July 2014 and that has resulted in a decline of nearly $5.00 per ounce during the last three months alone.

There are many explanations for this “weakness” in Silver, including accusations of manipulation by the “commercials.” However, it is
not that Silver is “weak;” rather, it is that the Dollar has become strong in relation to Silver.

The reasons for the strength of the Dollar open the door to a different discussion…

The most recent CFTC “Commitments of Traders” report on Silver discloses nothing unusual – the Commercials are net Short, as
they always are, while the Large Speculators and the Small Speculators (the “man in the street” traders) are net Long, as they
always are. Recent comments reflect a broadly-held and rather sullen belief that “the market is wrong,” leading to a profound desire
to will Silver higher.

Nevertheless, Silver has refused to budge, and consternation abounds.

Was there anything in the charts, back in July 2014, that gave any hint of the unremitting decline in Silver which began at that time?
Let’s take a look.

https://investtosuccess.com/unorthodox-candlesticks-patterns-foretold-decline-silver/ 1/4
5/8/2018 Unorthodox Candlesticks Patterns Foretold The Decline In Silver

The Monthly chart of Silver shows a mini-high in July, and a tall (comparatively) black candle whose “Real Body” nearly “bearishly
engulfed” the “Real Bodies” of the three candlestick price bars that preceded it – nearly, but not quite, in that it just missed engulfing
the bottom of the “Real Body” of the first bar.

A “purist” would have seen an engulfment of the second and third of the three “Real Bodies,” but not an engulfment of the first one.

I would argue that the pattern was sufficient to justify serious consideration of entering a bearish position purely on the basis that the
“Real Body” of the tall black candle clearly bearishly engulfed the “Real Bodies” of the two candles that immediately preceded it, and
that the bearish engulfment of the “Real Body” of the first of the three was close enough to classic perfection, as a practical matter, to
“count” as a bearish engulfment and for the entire pattern to “count” as a “Bearish Engulfing Pattern.”

I would argue in favor of establishment of a bearish position even though, by strict definition, this four-bar pattern was not a “Bearish
Engulfing Pattern,” but was instead a valid “Unorthodox Candlestick Trend-Reversal Warning Pattern” worthy of consideration in its
own right.

Although the Weekly chart provided a basis for decision-making, we nevertheless would have wanted to know (at the time) what the
corresponding Daily chart of Silver revealed. It so happens that the Daily chart revealed another imperfect “Bearish Engulfing
Pattern,” in that the “Real Body” of the tall black candle that bookended the right end of the pattern, just missed totally engulfing the
tops of the “Real Bodies” of the two candles that immediately preceded it (although it did totally engulf the “Real Bodies” of eleven
candles before those two).

Had the pattern been a classically-perfect “Bearish Engulfing Pattern,” the engulfment of a total of thirteen “Real Bodies” would have
been regarded as a powerfully bearish pattern, especially if confirmed by the corresponding Weeklychart. Here again, this
“Unorthodox Candlestick Trend-Reversal Warning Pattern” was close enough to classic perfection, as a practical matter, to warrant
serious consideration of immediate establishment of a bearish position.

https://investtosuccess.com/unorthodox-candlesticks-patterns-foretold-decline-silver/ 2/4
5/8/2018 Unorthodox Candlesticks Patterns Foretold The Decline In Silver

The proof is in the performance. Following the appearance of these two bearish “Unorthodox Candlestick Trend-Reversal Warning
Patterns” in July, the price of Silver declined $4.94, measured from the High on July 10 to the Low on October 3. Had a Silver trader
failed to appreciate the significance of these patterns when they appeared, especially as displayed on the Daily chart, an excellent
trade opportunity would have been missed.

“Unorthodox Candlestick Trend-Reversal Warning Patterns” can occur in any charted financial vehicle, in any time frame. Here are
two of them that occurred on a single chart of the GBP-USD:

The “Osaka Clipper” is a variation of the “Evening Star,” which is a bearish pattern; so the “Osaka Clipper” is bearish, as well. The
“Evening Star” will have a single small “Real Body” (a “Star”) at or above the tops of the “Real Bodies” of the tall white candle and of
the tall black candle (which are the “bookends” of the pattern), whereas the “Osaka Clipper” variation of the “Evening Star” has two.

https://investtosuccess.com/unorthodox-candlesticks-patterns-foretold-decline-silver/ 3/4
5/8/2018 Unorthodox Candlesticks Patterns Foretold The Decline In Silver

This particular example of the “Osaka Clipper” displays a skewed pattern, in that the “Real Body” of the tall black candle should have
been situated approximately level with the “Real Body” of the tall white candle. Still, because we will accept less than perfection and
because we have taught our eye to be flexible in interpreting what it sees in the ongoing search for trend reversals, we understand
this particular example to be an “Osaka Clipper;” and we therefore understand its bearish implications.

Please note that the first of the two little “Stars” was also a “Doji,” which means that the Open and the Close of that bar were
identical, or very nearly so (Open = 1.6937; Close = 1.6932). A “Doji,” when it appears at the top of a price rise, is itself a bearish
signal.

The second bearish warning shown on this chart was an Imperfect “Evening Star.” It was an “Evening Star” because…

1) It appeared after a price rise.

2) It was “bookended” by a tall white candle and a tall black candle.

3) It featured a single “Star” at, or near, or above the tops of the “Real Bodies” of the tall white candle and of the tall black candle,
and was situated between them.

It was an imperfect “Evening Star,” and therefore, an “Unorthodox Candlestick Trend-Reversal Warning Pattern,” because the tall
black candle was a little too short on the downside to fit the classic understanding of an “Evening Star.”

It’s also worth noting, first of all, that the “Star” in this example was a “Shooting Star,” which is itself bearish. On top of that, it was
nearly a “Doji,” and thereby made the “Star” doubly bearish. The clear implication of this overall three-bar pattern was bearish and
the subsequent decline in price justified that assessment.

Knowledge and understanding of “Unorthodox Candlestick Trend-Reversal Warning Patterns” and the ability to recognize them on
sight should be an integral part of every market participant’s trading and investing arsenal.

“Your eye does the work.” To paraphrase a comment by a Justice of the Supreme Court (in relation to a subject unrelated to this
one), “You’ll know it when you see it.”

Posted in Indicators, TradingTagged candlesticks, indicators, trading

Why Has Gold Reached New Lows? 5 Pitfalls To Using A Trade Signal Service

Leave a Reply

You must be logged in to post a comment.

https://investtosuccess.com/unorthodox-candlesticks-patterns-foretold-decline-silver/ 4/4