I was doing some work on the Silver ETF (SLV) and wanted to show a simplified version of a potential ‘confluence projection' zone at the $18 level which I found interesting and worth a look.

(Click for Full-Size image at Flickr)

I noticed that the recent price swings were symmetrical, and I wanted to see what overhead levels of Fibonacci Price Extension (the Extension Tool on most platforms) existed.  These are drawn with the Blue Lines.

Most extensions start with a low, are drawn to a swing high, and then are drawn to the next swing low.  See my basic tutorial on my "How Do You Draw Fibonacci Extensions/Projections?" post.

For example, the first extension starts at the $8.45 low, rises to the $14.42 high in February 2009, and then ends at the April lows near $12.00.  The grid is drawn upward which shows the 61.8%, 100%, and 138.2% Fibonacci projections.

The second grid is drawn using the same logic.

The red lines reflect Fibonacci Retracements - the first of which "retraces" from the March 2008 high to the October 2008 low - I eliminated the main retracement lines and am just focusing on the 78.6% retracement at $18.07.

Finally, I'm showing what Robert Miner calls an "External Retracement" off the $8.45 lows to the $14.42 highs - revealing the 138.2% "external retracement" at $16.70 and - more importantly - the 161.8% external retracement at $18.10.

What's the point?

All four Fibonacci tools reveal confluence at the $18.00 per share level, which is above price currently.  This makes it both a potential target to play for, and more importantly a potentially low-risk, high probability short-sell trade as this level would be expected to hold as "Confluence Resistance."

If price does support here at the $16.00 per share level, look for a play to $18.00.  If price makes it to $18.00, take profits and see how price reacts to these confluence Fibonacci zones.

If anything, you can file it under "Hmm.  That's interesting."