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SLV ETF Bull Market Remains Intact
SLV ETF Trading
- Panic, Shouting & Media Hype!
Itís all too easy to lose yourself and your position under emotional strain.
Letís face it, itís hard
to think straight when a voice inside your head is screaming GET ME OUT OF HERE!
And donít think emotional
reflexes are the preserve of amateurís only. Professional Money Managers are
certainly not immune to panics, especially since they are judged on much shorter
timeframes and scrutinized intensely against benchmarks and peers.
That said we find 2
trading techniques help us to sit tight with our positions:
1 Ė Never bet the Farm.
2 Ė Remain focused on the big picture at all times.
Regarding rule 1:
The winner in investing is the one who stays in the game the longest. No matter
what kind of slam dunk you think youíve got, DONíT go betting the farm, strange
things happen under the Sun! The last thing you want to do is take a loss that
takes you out of the game PERMANENTLY. Size your positions accordingly.
Regarding Rule 2:
The best way (we find) to remove emotions from the picture is to keep an Eagle
eye on the charts. And here we find it best to start with longer dated monthly
charts which give us a sense of where price action has been.
Take our current favourite
Ė Silver or SLV the Silver Bullion ETF:
Figure 1 - SLV ETF
monthly still in long-term uptrend
Some noteworthy items:
* SLV etf has been in a
bull market since 2001 and the price has risen by 5X.
* Since 2002 the 3rd and
4th quarters of each year have been strong for SLV.
* The current correction
is similar in magnitude to the early 2004 correction.
* Throughout all gut
wrenching corrections, the price has remained above the blue uptrend line.
* The price is now at
significant support in the form of the abovementioned uptrend line; horizontal
support (second blue line) and 50 Month Moving Average (red circle).
Synopsis: Whilst it is
impossible to say whether support will hold (we discuss the fundamentals below)
we do think the current level offers an excellent entry point once we have a low
risk setup in our trading model.
Letís take a closer look:
Figure 2 - SLV ETF
The takeaways from the
The SLV double top in
July ($19.17) was difficult to identify because it was somewhat short of the
exuberant $20.73 reached in February. However the extreme divergence in the
RSI (top) and MACD (bottom) was an early sign that SLV had topped out.
Once the price dropped
below support at $16 (blue line and 50-week moving average) the chart painted
a technical target of around $12 (lower blue line).
The correction has
followed a classic Elliot Wave A-B-C (marked above) where the magnitude of
wave C equals Wave A and once again paints a target for SLV of $12 (red
In addition to
representing a technical correction target, $12 is strong support on the
monthly chart (figure 1) as well as the August 2007 bottom and 200-Week Moving
We would be amiss if we
didnít point out that $12 has not been reached just yet.
And finally, to round off
the picture lets zoom in on the daily chart for SLV:
Figure 3 - SLV ETF
Trading Chart, Daily
Noteworthy items here are
the 2 gap down events (blue circles) and the potential double bottom in the RSI
The rationale behind gap
events in technical parlance is that markets HATE a vacuum and usually end up
backing and filling the gaps Ė at least that has been our experience.
The double bottom on the
RSI is a hopeful sign that the downward price action is decelerating.
Long-Term Fundamentals for SLV
The fundamentals are
probably even more bullish now than before the sell-off (we know thatís no
consolation). Supply remains slow coming on-stream as new mines take months and
years to get up to full production.
On the demand side, if you
believe (as we do) that Precious Metals (Gold and Silver) are the antithesis of
financial paper assets. And the institutions who are bastions of those financial
assets remain seriously encumbered, with more to come, then youíd agree that the
demand for SLV will remain robust.
Anecdotally, the Silver
Bullion dealers we have spoken to all tell us that demand for Physical Silver
(of which SLV is the ETF) has actually increased since the sell-off and Silver
Rounds and Bars are hard to come by.
Technically we are near a buy zone for SLV. Whilst we may yet go down to test
$12 we are now close enough to the Buy Zone for probabilities to be skewed in
our favour. WE will be looking at SLV at these prices over the next few weeks
for a possible entry!
More commentary and stock
picks follow for
Vermeulen is Founder of the popular trading site
There he shares his highly successful, low-risk trading method. For 6 years
Chris has been a leader in teaching others to skillfully trade in gold, oil, and
silver in both bull and bear markets. Subscribers to his service depend on
Chris' uniquely consistent investment opportunities that carry exceptionally low
risk and high return. Reach Chris at: Chris [at] theGoldAndOilGuy [dot] com
This article is
intended solely for information purposes. The opinions are those of the author
only. Please conduct further research and consult your financial advisor before
making any investment/trading decision. No responsibility can be accepted for
losses that may result as a consequence of trading on the basis of this