Compression On Silver Chart

Silver 4H

Silver is showing an excellent example of Compression. I blogged about it in the previous post. Notice that price has been spiking up and down to remove the prior demand (Orange circles) and supply (White circles). Unfortunately I'm unable to tell which direction it'll break in, but I'm pretty sure that when price breaks on either side it'll hit either the Supply or Demand zone very quickly because there is nothing in the way to hold price back. Due to the recent sharp drop, I'm inclined to think that price is bear flagging (look at daily chart for a clearer view of the flag/pennant), and as such will short Silver if price breaks the uptrend line with a strong bearish candle. The first TP will be the Demand zone below. If it breaks up instead, I'll pass on the trade because I don't intend to fight such a strong move down.

I just want to add that Compression is not price consolidating tightly, nor has trend lines anything to do with it. I only added the trend lines in for visual clarity. Compression is about price making a conscious effort to remove prior demand/supply, it can appear spiky or squeezed. The key to a good compression is that there is a clear path without trouble areas to the next demand or supply zone.