Greetings,
We have recently received several emails from traders asking about silver and if now may be a good time to enter a trade, so today we will take a closer look at this metal from a trader and investor point of view. Silver has been a hot commodity over the last several years and since 2008 has traded from below $10 a ounce to almost $50 in April 2011, since then however silver has been in a correction as it digests a 3 year, 400% move in price. In May of 2011 and again in September 2011 silver sold off hard on heavy volume and has made a series of lower highs and lower lows in the process and currently trades 35% below those all time highs set in April. When you consider the huge price move to the upside in the last decade, a 35% decline from that high water mark is a bit easier to digest and at the current price of $31.23 it may be time to take a closer look at this precious metal.
For the purpose of this article we will use the i-Shares Silver Trust (SLV) since hitting a 52 week low of $25.65 on December 29th SLV has put together 3 weeks of upside price action. This past week ending January 20th SLV gained just over 8% on light weekly volume, but Friday’s move of 5% came on better than average daily volume and that move has put SLV just above the 50 day moving average. So as a trader I would recommend using the SLV or what we call a paper trade, meaning you do not own the physical silver but instead own it on paper. The obvious advantage to this is liquidity as you can trade this as you would any other stock or ETF and can move in or out of the trade with the click of your mouse, unlike owning silver bars or coins that you must store and hold and then take to a dealer if you want to sell. As a trader, Friday’s price and volume action may be a bullish signal and with that said we can call it a strong buy in the $30 to $32 range and a good place to start a position, we would then look to add to our position on a high volume break above $34.50 if we should get positive price action. As a stop loss I would use $28 as a mental stop and $27 as a absolute stop loss.
But we would be neglectful to not consider those that want to “invest” in physical silver as the reasons to invest in silver are solid. Silver demand is driven by investors and industry. As a safe haven asset, silver preserves and protects wealth in times of economic distress. As an industrial metal, silver is indispensable Silver can be found in an ever expanding array of products such as televisions, computers, and smart-phones. Owning physical silver can be done in a few ways from silver bars, to coins, and below we will provide a few links for you to explore the different products available. One last thought to consider when investing in silver either as a paper trade or collecting physical silver is that like any other investment, supply and demand is a key driver and we must also realize that as a commodity, silver is also driven in part by the strength/weakness of the dollar, a strong dollar is bearish for commodities and a weak dollar can be bullish.
Above we have a 6 month daily chart of SLV. In closing I have provided a few links for you to further explore silver.
Thank you for your visit, Best Wishes, $$$, ET. Equity Trader.me
About EquityTrader
We saw a nice up side movement in SLV yesterday and a close of $32.37 and it came on better than average volume as well. So far the trade on SLV looks good. If you look at the chart above you can see SLV starting to use the SMA 9 ( a fast moving average) as support, also notice the RSI line trending above the 50 level...
- spam
- offensive
- disagree
- off topic
Like