Not so fast! While many traders have already been riding the gravy train in silver, you might call me late to the game. And if you look at the price action over the last 12 months, that is a fair assessment. The price has risen off a bottom at around $13 and is now up near $15 - a 15% gain since the beginning of the year.
But when you look at silver in the context of its bear market since spiking to over $48 in 2011, this may be nothing more than a consolidating bounce or beginning of a bottoming. That is not to say that a 15% gain in less than 3 months is not real money. Congratulations to those who had the stones to jump in and buy at $13. But it will take more to convince me that the #2 shiny metal has turned around.
iShares Silver (NYSE:SLV)
Silver has made some strides. It has cleared the falling trend resistance since the beginning of 2015. And the move off of the January bottom has now seen a higher low and a higher high. So far, that higher high has been in the short-term. What would help solidify the turn around would be a move over the October 2015 spike. That would be a first intermediate-term new high.
The momentum indicators are supportive of more upside. The RSI is in the bullish range and rising while the MACD is moving back higher after resetting to start March. And there is a golden cross that will print at the end of the week, a bullish signal where the 50-day SMA crosses up through the 200-day SMA. This has not been seen since the false signal in August 2014 (so beware), and would add weight to the turn around argument.
If the bottom is in, many will look towards Fibonacci retracement where even a Dead Cat Bounce could go. The first target would be a 38.2% retracement or a move up over $26. And that could still be a ‘failed’ bounce. With that kind of potential, perhaps waiting for that intermediate new high just 50 cents away is not as bad an idea as it seems.
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