SLV ETF Bull Market Remains Intact

By: Chris Vermeulen | Wed, Aug 20, 2008
Print Email

SLV ETF Trading - Panic, Shouting & Media Hype!

It's all too easy to lose yourself and your position under emotional strain.

Let's face it, it's hard to think straight when a voice inside your head is screaming GET ME OUT OF HERE!

And don't think emotional reflexes are the preserve of amateur's only. Professional Money Managers are certainly not immune to panics, especially since they are judged on much shorter timeframes and scrutinized intensely against benchmarks and peers.

That said we find 2 trading techniques help us to sit tight with our positions:

1 - Never bet the Farm.
2 - Remain focused on the big picture at all times.

Regarding rule 1: The winner in investing is the one who stays in the game the longest. No matter what kind of slam dunk you think you've got, DON'T go betting the farm, strange things happen under the Sun! The last thing you want to do is take a loss that takes you out of the game PERMANENTLY. Size your positions accordingly.

Regarding Rule 2: The best way (we find) to remove emotions from the picture is to keep an Eagle eye on the charts. And here we find it best to start with longer dated monthly charts which give us a sense of where price action has been.

Take our current favourite - Silver or SLV the Silver Bullion ETF:

Figure 1 - SLV ETF monthly still in long-term uptrend

Some noteworthy items:

* SLV etf has been in a bull market since 2001 and the price has risen by 5X.

* Since 2002 the 3rd and 4th quarters of each year have been strong for SLV.

* The current correction is similar in magnitude to the early 2004 correction.

* Throughout all gut wrenching corrections, the price has remained above the blue uptrend line.

* The price is now at significant support in the form of the abovementioned uptrend line; horizontal support (second blue line) and 50 Month Moving Average (red circle).

Synopsis: Whilst it is impossible to say whether support will hold (we discuss the fundamentals below) we do think the current level offers an excellent entry point once we have a low risk setup in our trading model.

Let's take a closer look:

Figure 2 - SLV ETF Weekly Chart

The takeaways from the above chart:

And finally, to round off the picture lets zoom in on the daily chart for SLV:


Figure 3 - SLV ETF Trading Chart, Daily

Noteworthy items here are the 2 gap down events (blue circles) and the potential double bottom in the RSI (top).

The rationale behind gap events in technical parlance is that markets HATE a vacuum and usually end up backing and filling the gaps - at least that has been our experience.

The double bottom on the RSI is a hopeful sign that the downward price action is decelerating.

Long-Term Fundamentals for SLV

The fundamentals are probably even more bullish now than before the sell-off (we know that's no consolation). Supply remains slow coming on-stream as new mines take months and years to get up to full production.

On the demand side, if you believe (as we do) that Precious Metals (Gold and Silver) are the antithesis of financial paper assets. And the institutions who are bastions of those financial assets remain seriously encumbered, with more to come, then you'd agree that the demand for SLV will remain robust.

Anecdotally, the Silver Bullion dealers we have spoken to all tell us that demand for Physical Silver (of which SLV is the ETF) has actually increased since the sell-off and Silver Rounds and Bars are hard to come by.

To conclude: Technically we are near a buy zone for SLV. Whilst we may yet go down to test $12 we are now close enough to the Buy Zone for probabilities to be skewed in our favour. WE will be looking at SLV at these prices over the next few weeks for a possible entry!

More commentary and stock picks follow for subscribers...

 


 

Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
- MB Trading
- OEC OpenECry
- The Fox Group
- Dorman Trading
- Vision Financial

He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

Copyright © 2008-2014 Chris Vermeulen

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/