Silver: Don’t Get Too Excited

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Mike Hammer | November 5, 2019 11:00am NYSE:SLV

NYSE:SLV | News, Ratings, and Charts

Seems a lot of analysts are getting giddy about silver, again. Right now your friendly Gold Enthusiast urges caution; here’s why.


It’s easy to draw any darn lines you want on a chart.  Here, for example, is an article featuring – right at the top – a chart for gold with lots of lines drawn. If you look at what the actual price is doing, you’ll notice it’s fading off at the end of the chart, i.e. the present.

Yet there’s an arrow drawn in pointing up!

The justification for it is that two SMAs crossed in a bullish manner just before. But, trading rules for SMAs are quite clear that when the “SMA indication is positive” but price is going down: You wait for either a relative bottom in price or an upside breakout of the most recent high.

Because, after all, trends eventually change and you don’t want to be the one holding the bag at the end.

The chart for silver is a little more bullish. Here is the chart for SLV with the Gold Enthusiast’s marks and notes.

silver prices chart

(credit Fidelity.com)

The chart has a clear rising support line.  Breaking that indicates the end of the current trend – or, in trading terms, a good time to sell.

There are two recent highs, circled. These are the “wise trader” entry points for new long trades.  Wise because while price is below either of these, we are not sure if we’re seeing a real breakout yet.  Or if we’re already in the downside and just can’t quite tell.

There are a million variations, “enhancements”, and spins on this simple way to analyze a chart for trading.  But over the years “simpler is better” often works out really well for the retail trader.

Signed,

The Gold Enthusiast

DISCLAIMER: The author holds no position in any mentioned security.  The author is long the silver sector via small positions in USLV, PAAS and SVBL. He may daytrade around these positions but has no intentions of trading out of these core positions in the next 48 hours.


The iShares Silver Trust (SLV) was trading at $16.48 per share on Tuesday morning, down $0.37 (-2.20%). Year-to-date, SLV has gained 3.06%, versus a 15.48% rise in the benchmark S&P 500 index during the same period.

SLV currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #9 of 33 ETFs in the Precious Metals ETFs category.


About the Author: Mike Hammer

Mike HammerFor 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.


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