While most traders pay much more attention to gold, silver is trying to vie for their attention currently. While gold rallied into a known resistance area recently, silver quietly broke to new recovery – and new 52-week highs. The question now remains – is the breakout real or just a trap?

Let’s start with the big picture of the Weekly chart for silver’s tradeable ETF SLV:

Click on image to enlarge!

A quick chart glance shows us a very significant ascending triangle formation – drawn with blue price trendlines. Traditionally, triangles are price consolidation patterns that precede breakouts and impulse trend moves.

Did silver (SLV) officially break out of the ascending triangle pattern – and if so, are we likely to see a swift rise in Silver prices?

That’s certainly a possibility, but let’s look at other factors.

First, we have an obvious negative momentum (lower indicator – MACD setting 3, 10, 0) and volume divergence throughout most of the recent rally. That’s a bearish caution sign that gets thrown in the mix.

Otherwise, we observe a massive level of support via rising moving averages and trendlines underneath price currently – specifically at the $17 and $18 level.

Thus, any price move unexpectedly under $17 would be an official signal that the proposed breakout FAILED, and would expect a lower move. But that clearly hasn’t happened yet.

Looking back, price was unable to break free of the $19.00 per share trendline as indicated with red arrows.

Breaking free to a new 2010 high, silver has to contend with the established price high at $20.50 made in late 2007 – it would be more appropriate to label an official breakout – and thus expectation for much higher prices yet to come – on a break and close above $21.00 per share.

Now, let’s drop to the closer perspective of the Daily Chart of SLV:

Click on image to enlarge!

I won’t go into as much detail, but will note the crystal clear – and classic – price breakout (complete with gap) in late August above the trendline at $18.00 per share.

Notice the corresponding volume spike – all of which suggested that higher prices were likely yet to come – and they certainly did. This is a good example of how a trendline breakout – when combined with a price gap and surge in volume – is a good trade trigger to expect higher prices yet to come (in other words, NOT a trap).

But now, price seems to be having trouble breaking free above $19.50. Keep in mind that price gently nipped to a new high Friday and today – it certainly did not do so with compelling volume or momentum (or a gap).

For now, that’s bearish and suggests that the price could fall at resistance.

Of course, a clean strengthening in price – leading to a price breakout on high relative volume – would overcome this bit of bearishness.

That’s why – if you’re watching or trading SLV – you need to keep a close eye on what happens in the days ahead. It will mean the difference between a further rally and breakout in price – leading even to higher prices yet to come – and a frustrating bear trap that will result in a retracement of this recent move.

Watch – and trade – carefully.

For more daily updates from Corey, visit his blog at Afraid to Trade.com