(This is Part 3 of a series. Go back to Part 2.)
Notice that in this weekly chart of silver that the STX is looking like a whole different animal. It is following the market with great fidelity, staying neither too far away nor approaching too close.
Of course, in order to do this for you the STX is actually attempting to predict, continuously and in very sophisticated fashion, where this silver move will and will not tend to go during its thrusts and counter-reactions. Note that the STX is not saying that it cannot be hit. Of course it can, and sometimes the STX should be hit if the market is reacting back too far.
Rather, the STX is attempting to predict for you where a stop can be placed—considering all sorts of factors—that might provide the greatest probability of allowing you to take profitable advantage of the move.
Now notice something else. After the first large thrust in silver, culminating in the top that occurred in May of 2006, the silver market hit a huge air pocket and then began what looks like a secondary bull move. And notice that the STX doesn’t look particularly helpful once this intermediate top is in, either on the down move or the secondary up move.
In fact, the horizontal structure of the STX after the top is now telling you that—on this timeframe—a large consolidation to digest the first leg is taking place. But—forgetting for a moment the downward collapse—suppose you wanted to take advantage of the secondary upward move?
Now let's look at the daily chart of silver:
(This is the end of Part 3. Go to Part 4.)
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