In addition to the classic reverse head and shoulders pattern forming in silver, there is another very interesting bullish indicator currently. But first, credit to where credit is due. This is not my observation, but that of poster SRSrocco over on the TFMetals boards.
This particular pattern involves a divergence between the price of silver and its Accumulation Distribution Line (ADL). What is an ADL you ask? The ADL is purely a technical indicator. It is merely a calculation involving existing price and volume information. According to Stockcharts.com there are three steps involved in its calculation:
1. Money Flow Multiplier = [(Close - Low) - (High - Close)] /(High – Low)
2. Money Flow Volume = Money Flow Multiplier x Volume for the Period
3. ADL = Previous ADL + Current Period’s Money Flow Volume
In a nutshell, the ADL is the running total of the Money Flows weighted by volume. The Money Flow itself is an indicator of the underlying market pressure which is either positive or negative. For instance, if the price of silver closes in the upper half of its daily range, that is considered a positive Money Flow. So even if the price is net lower for the day, it is still a positive sign as it recovered significantly off its lows. This is interpreted as a potential long term upper buying pressure being acted upon by a short term selling pressure. (more)