Thomas Carreno: A comment poster wrote me and asked me if I thought the iShares Silver ETF (NYSE:SLV) was a good long buy from the 37 level. My response would be that one should be keenly aware that the SLV has already made a huge move from early February 2011 up until the present time frame. Early February 2011 was the ‘easy buy'.
Now the SLV is in a more mature advance stage and I think if one is going to go long from here it should be more a shorter term swing trade long position with a tightly controlled stop.
Why? Because even though momentum still looks quite strong, the chances for more technical selling coming in more heavily are more likely during this stage. So if one gets too complacent, there is the risk of getting caught in a big profit taking wave.
[Related -Perfect Storm Driving Gold Higher]
So, I would say that if I were to go long the SLV from here I would try to do it from 37 or slightly under and then set a protective stop loss at 35.70. That would put the stop loss right under the recent break out area. Assuming an entry at 37 and then assuming the stop loss gets hit the same day or next day it would equate to a loss of 3.51%.
I mentioned before there was a chance SLV could see 40 to 42 range. That would equate to a gain of either 8.10% or 13.51 percent respectively. I see 40 to 42 range as heavy resistance based on the broadening wedge structure.
So a possible 3.51% loss versus a possible 8 to 13% gain ? It seems to be a favorable risk reward. But since the SLV is now so mature in its advance it is by no means a blockbuster risk reward. It is ‘ok', but there is probably much better out there right now.
[Related -SPDR Gold Trust (ETF) (GLD): 3T Analysis: Target $1,400 but Box Bound]
Also I should mention that I am a little bit concerned about the Gold price and the SPDR Gold ETF (NYSE:GLD) inability to get a weekly MACD bullish cross so far this week. The weekly MACD buy signal in the GLD that looks about ready to occur is not occurring. Instead I am seeing a ‘bear kiss' on the weekly MACD of the GLD. This could be a short term bearish sign and is something to be aware of. Ideally the GLD would be up the last two days of this week.
The daily MACD of the SLV is in a similar situation where it is trying to get a bullish cross but is not able to do it yet… So there is a potential for weakness the rest of this week.. will just have to wait and see how the tape looks on both metals into end of week. I would like to see both of them finish this week with two strong up days.
If they are both strong up into rest of week then that could be the green light for a small new momentum run.
Other Related ETFS: Sprott Physical Silver Trust (NYSE:PSLV), ProShares Ultra Silver (NYSE:AGQ), ETFS Physical Silver Shares (NYSE:SIVR), PowerShares DB Silver (NYSE:DBS), ProShares UltraShort Silver (NYSE:ZSL), UBS E-TRACS CMCI Silver TR ETN (NYSE:USV), Global X Silver Miners ETF (NYSE:SIL).
Written By Thomas Carreno From Best Online Trades