Silver: Long-Term Chart Improving

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December 25, 2019 3:03pm NYSE:SLV

NYSE:SLV | News, Ratings, and Charts


At the end of the year, it’s always worth taking the time to assess how markets are closing on a yearly bar basis. The most significant moves subject to the least noise are always the easiest to navigate on long-term charts. When it comes to silver (SLV), the yearly chart is finally trying to perk up, with the metal within the closest proximity to its 10-year moving average since its bear market began. In addition, while it may not have felt like it, the metal is on track for a near five-year high on a yearly closing basis, despite coming up shy of its prior 2014 high on an intra-year basis. These are both positive developments and suggest that silver has a good shot at finally regaining its 10-year moving average in 2020. Based on this, I believe any dips of 10% plus in 2020 are going to be buying opportunities.

 

A screenshot of a computer Description automatically generated

(Source: TC2000.com)

As the above yearly chart shows, it’s been a lost decade for silver investors. For those that weren’t fortunate enough to run into the parabolic peak registered in 2011, their positions have been obliterated since. Not only has silver more than satisfied the 20% correction needed to confirm a bear market, but the duration of this decline has been above the average 3-year duration of secular bear markets. Most secular bear markets tend to find a low after three years of losses, but silver’s decline took over four years (2011 to 2015), and the massive swings to demoralize investors have been commonplace since. This is great news for the bulls, even if it’s been a tortuous period to sit through. This is because it means the beginning of a new bull market is going to be met with a drove of doubters and naysayers.

The good news for the silver bulls is that this bear market looks like it might finally be coming to a close. Silver is now within striking distance of its 10-year moving average, which sits at $18.00/oz, and has a good shot at reclaiming this level on a yearly closing basis for 2020. The first annual close back above the 10-year moving average was the end of 2003, and 2004 began three massive years for the metal, with 15%, 29%, and 47% returns respectively for 2004, 2005, and 2006. Therefore, if silver can finally blast through this critical resistance next year and hold its gains, the 2020s could be very good to the silver bulls. While it’s possible silver could take out this level to finish 2019, it will require a strong few days.¬† In order to complete this signal for 2019, silver will need to close above $18.05/oz on December 31st.

If we zoom in to the yearly chart, there’s another positive development that I believe many are overlooking. While many market participants are likely watching the 2014 high of $21.25/oz to wait for a confirmed breakout, we see exceptional strength on a closing basis and a significant change of character in 2019. As of the current price of $17.65/oz for silver, we are on track to put in a new 5-year high close for the metal. I believe this is even more significant than taking out the $21.25/oz high in 2014 as that high immediately ran into selling pressure. Therefore, a yearly close says a lot more about bullish positioning than a brief spike to a new high intra-year that shows zero commitment. If the bulls can put in a yearly close above $17.15/oz, this would be a bullish development, and mark a new 5-year closing high.

A screenshot of a computer Description automatically generated

(Source: TC2000.com)

While the short-term charts still need some work, silver is finally beginning to perk up on its long-term charts and hinting that this bear market is finally over. The key to improving this view will be a yearly close above $17.15/oz for silver, with an annual close above $18.05/oz confirming that a new bull market has likely begun. Pullbacks are normal, and we’re likely to see a couple of double-digit ones in 2020. Still, I believe they will present buying opportunities for those investors patient enough to accumulate on weakness.


The iShares Silver Trust (SLV) closed at $16.58 on Tuesday, up $0.30 (+1.84%). Year-to-date, SLV has gained 3.69%, versus a 20.86% 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: Taylor Dart

taylor-dartTaylor Dart has over 10 years of experience in active & passive investing specializing in mid-cap growth stocks, as well as the precious metals sector. He has been writing on Seeking Alpha for four years, and managing his own portfolios since 2008. His main focus is on growth stocks outperforming the market and their peers. In addition to looking at the fundamentals, he uses different timing models for industry groups, and scans upwards of 2000 stocks daily to identify the best fundamental opportunities with the timeliest technical setups. Taylor is a huge proponent of Trend Following and the “Turtles” who enjoyed compound annual growth rates of over 50 percent per year.


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