Will Silver (SLV) Prices Keep Sliding?

| September 12, 2019 | 0 Comments

silver pricesSilver’s impressive run-up came to a halt last Thursday when some good news about the US-China trade war hit the Twitterverse. (We’ve given our opinion on that already, so we’ll just move on.)

You’ll remember our adage about drops hitting 3x as hard as rises – well it wasn’t true in this case.

The last 3 trading days brought a drop equal to the previous 6 up trading days, so the drop was only 2x as sharp. But for those who bought in during the last few days of the run-up it probably felt 3 times as bad.

Here’s the chart for SLV, the most popular unleveraged US ETF for silver.

silver

A few things your sleepy Gold Enthusiast would like to point out.  First, this wasn’t a straight run-up; there were a fair number of small corrections/fallbacks/consolidations along the way. None as big as the drop the last 3 days, but there nonetheless.Second, the RSI was clearly in overbought territory for a while there. That’s not at all unusual during run-ups, but the RSI peak of 84 was a clear warning not to put any new money in. It can be very hard to know when to sell but it’s not that hard to see when a sector is clearly overbought. (For true newbies, the general rule about RSI is that anything over 70 is overbought, and over 80 is VERY overbought.)

The rising uptrend support line shows the current uptrend is still intact until around 16.50, so we’ll be watching 16.40 as the last line of defense for the current run. Your Gold Enthusiast is not a betting man, but if he was pushed for a prognostication he’d have to say he expects the uptrend line to be broken by a consolidation, not by a big drop.

Much of the run-up was probably due to silver being so ridiculously inexpensive compared to gold.  Investors suddenly noticed that and rushed in for the sale price. Of course that drove the price up; some will doubtless sell or have already sold, but some were smart and didn’t buy everything they wanted to. Those folks will come back in and buy on the dip eventually – it’s not happening yet, but that may come in a few more days. Then we’ll see where the consolidation starts.

Signed,

The Gold Enthusiast

DISCLAIMER: The author has 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 72 hours.

Note: This article originally appeared at The Gold Enthusiast on September 10, 2019.

 

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About the Author ()

Mike Hammer has had a wide-ranging career, with trading and investing as a continuing theme. Mike graduated from UC Berkeley with a business degree, then worked with Macy's in their operations arm. He left Macy's and spent a summer trading his own account, which taught him a lot about trading in general and markets in particular. Trading through the Black Monday and the Crash of 1987 showed him how most people are unprepared for upheavals in their trading. He then joined Waddell & Reed as a financial advisor, helping regular people understand their finances and meet their life goals. Then came the usual story - Mike met and married the lady of his dreams. They moved to upstate New York, where Mike worked first for a small manufacturing consulting company, then Cornell University. While loving the work and the higher-education atmosphere, Mike missed the world of finance. Eventually, he signed up for stock trading coaching with the Adam Mesh Trading Group, to learn from people who understood modern markets. Within a year, Adam asked Mike to become a stock trading coach. Since then, Mike has trained over 200 individuals, spoke at several national conventions, and is a frequent contributor to conference calls across the Adam Mesh community. Mike writes The Gold Enthusiast daily newsletter, runs the Golden Hammer trading service, and participates in the Mesh Private Portfolio. He also keeps a position in international education which keep him in touch with "the student mindset". Mike closely follows the gold, energy, and financial sectors. His motto is "Plan your trade, then trade your plan!"

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