It has been awhile since I charted silver because of my interest in gold’s big move. Like others I am seeing the potential for a trade in silver.
The gold chart shows a big red candle on big volume. Quit simply we ran out of buyers at all time high prices for gold. This should not be earth shattering news and has to happen. The question is how far down do we go to shake out the weak hands and draw the smart money back? I suspect it will not be that far, but some period of consolidation is needed. The market is currently down 15 to 1815 and will not show on this chart until the close. So gold is holding right now at the first level of support at 1817. I suspect we will pass through that level and work towards the 18 day moving average currently at 1746. The Fibonacci 38.2% retrace is also at that level and provides additional natural support. Stochastic has hooked and has taken a downward trajectory towards the 80 level. A cross there loses the embed (3 consecutive day above 80) and will target the 18 day moving average as a price objective. If we go to this level, price will be back into the initial trend channel that is far more sustainable then the accelerated channel that has just been breached. Keep in mind the up trend remains intact all the way down to the last swing low at 1725. I would be a happy buyer approaching that level and it would be right near the bottom of the trend channel for a total of a 10% correction from the top. In other words, 1725 would give us a run of the mill and rather tame 10% correction, perfect for people interested in a well timed entry.
For those who have to invest in something other than gold in hand, PHYS is your best bet as a fund that has the gold they claim to have. All gold is 100% allocated and inventoried, sitting in a vault at the Royal Canadian Mint. The premium to net asset value price has dropped to 1% from 5% and now is a genuine good value.
Price has fallen on 2 big candles through initial support just like I expect the spot gold chart will later today. Price is essentially at the next level of support coming from the Fibonacci 38.2% retrace and the 20 day moving average just below and near 15.0 Also, the last swing low is really pretty close at 14.93. Considering the whole picture, I think 14.93 is the critical level of support that we want to hold and will keep the up trend intact with a higher low. Stochastic has crossed the 80 level and sure enough it has targeted the 20 day moving average and is currently testing it. A big gap is sitting at 14.50 and since 95% of all gaps fill, this will likely happen. I would be a happy buyer in this gap just above the 50 day moving average.
Now we have silver, the most interesting trading opportunity IMO. I am using SLV as a proxy for the silver chart. I do not prescribe investment in SLV. It is a Ponzi scheme that will not survive the duration of this bull market in precious metals. I do however use this ETF as a trading vehicle with a small portion of my portfolio. If you want to invest in silver and cannot buy it to hold in your hands, PSLV is the best choice.
SLV has dropped down and filled the gap at 40, and is good news. Stochastic has put in a bearish cross of the 80 level and now price has zeroed in on the 20 day moving average as the first level of support. I am getting interested in a potential move to test the next layer of support coming from the last swing low and both of the 50 and 100 day moving averages, call it 37 – 37.70. I like an option play with an entry just above 37. A tight stop just below that level will protect against a move to 36 and back into the gap that waits to be filled. That level would be where I would attempt another entry. A tight stop there protects against a washout and a test of the 200 day moving average in the worst case scenario. If silver makes it down that far, I would be a wild-eyed bull buying with abandon.