RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

There are many different types of fundamental and technical chart patterns that market technicians focus on when making trading decisions, and multiple ways to interpret them. This is why technical analysis is an art form. The key is to be able to recognize these patterns and implement a trading strategy based on what you believe the charts are telling you will happen next. 

The Trend Line
You probably know the classic adage: the trend is your friend. There are dangers to fighting the trend; it leaves you with headaches and sleepless nights, wondering why you went against it. Sometimes the trend isn’t all that easy to identify, but it can help to look at charts over several time frames.

The trend line is one of the most basic charting tools. These are lines drawn across successively higher bottoms in bullish markets (moving up from lower left to top right), or successively lower tops in bearish markets (moving down from upper left to bottom right). A bullish trend is indicated by a series of higher highs and higher lows, and a bearish trend, by lower highs and lower lows. Look for three good tests of support or resistance. Breaking through a trend line is an important signal a trend is coming to an end.

You can see the trend in a very basic chart of the silver futures contract. In this case, I am looking at a daily continuation chart. The key to determine whether this is in fact a solid bearish trend is to look for three tests of resistance. To the far right of the chart, we see a possible shift in the long-term trend. The market bounces to a key resistance point, then bounces without much follow through—trading in an up down, up, down pattern. To signal a shift in trend, you want to look for two days of higher closes, with the second high above the previous day’s high. We can see in this silver chart below how the market has stayed below the trend line from March 13 until the time this article was published. 


March Silver Daily Chart


Phillip Streible

Early in his career Phillip began trading his own account as a screen trader focusing on the metals, grains and stock indices. He then became a Series 7 licensed financial consultant with A.G. Edwards. Later, he expanded his trading experience into a Series 3 licensed commodity broker with Investment Analysis Group. Most recently he was a senior market strategist at MF Global before joining RJO Futures in October 2011 as a senior commodities broker. As a senior commodities broker his goal is to show clients how to anticipate, recognize and react to bull and bear market conditions through the use of technical analysis techniques that help them to define risk.