It’s been a rollercoaster journey to start out 2021 for the Silver Miners Index (SIL), with the index starting the 12 months with a 9% return, solely to see this flip right into a (-) 9% year-to-date return every week later. This disappointing reversal has occurred due to an enormous U-turn in metals costs, with the silver worth (SLV) sliding 12% in two weeks simply as many had been proclaiming the metallic was on its manner above $30.00/oz.
Thankfully, whereas this has been a really nasty reversal, we haven’t seen any vital technical injury to the index simply but. It is because the Silver Miners Index stays above its key help degree at $39.80, which is the important thing to the bulls remaining answerable for the larger image. Let’s take a better look under:
Whereas the unbelievable begin to 2021 for the Silver Miners Index was definitely thrilling, it was fairly short-lived, with the ETF operating into promote indicators close to $50.00 per share, simply shy of a powerful resistance degree. A traditional correction of 5-10% from this degree wouldn’t have been alarming in any respect and would have advised we had been seeing accumulation.
Sadly, we’ve seen a virtually 20% correction as an alternative in lower than ten buying and selling days, which is a little bit of a pink flag if we will’t see these losses recovered quickly.
Whereas this doesn’t imply that the index has to proceed decrease, the bulls should begin to play some protection right here. It is because the index is now coming right into a key help degree at $39.80 weekly, and a drop under this space could be a damaging improvement for the medium-term image (3-6 months).
If we take a better take a look at the chart above, we will see that if the $39.80 degree is damaged for SIL, the ETF doesn’t have any significant help till 15% decrease on the $33.25 degree. Because of this, the bulls are going to wish to start out taking part in protection quickly to forestall the opportunity of a a lot deeper correction. Because it stands, we’ve robust help at $39.80 however very robust resistance at $50.35.
Subsequently, I see the perfect plan of action as beginning positions in the perfect silver miners near the important thing help space, with two of the higher miners being Pan American Silver (PAAS) and Wheaton Treasured Metals (WPM).
So, what manner is that this vary more likely to break?
Given the truth that the Silver Miners Index simply broke out of an enormous yearly base in August of final 12 months, I imagine that the index is more likely to escape to the upside, provided that it’s finest to offer the advantage of the doubt to the bigger time frame.
Nevertheless, with the violent correction we’ve seen, I don’t see any purpose to be aggressively positioning simply but, till we’ve concrete proof that the bulls are defending the $39.80 help degree. Going ahead, I’d view any dips under $39.80 as low-risk shopping for alternatives. Nevertheless, I see no purpose to get aggressive till the market can clear the $50.35 resistance degree on heavy quantity. For now, I’m lengthy solely two silver miners, Wheaton Treasured Metals and GoGold Sources (GLGDF), however I could look to go lengthy PAAS if this right deepens.
Whereas the bulls stay in management and get pleasure from the doubt, we’re going to wish to see $39.80 defended in any respect prices.
Disclosure: I’m lengthy GLD, WPM
Disclaimer: Taylor Dart is just not a Registered Funding Advisor or Monetary Planner. This writing is for informational functions solely. It doesn’t represent a proposal to promote, a solicitation to purchase, or a advice relating to any securities transaction. The data contained on this writing shouldn’t be construed as monetary or funding recommendation on any material. Taylor Dart expressly disclaims all legal responsibility in respect to actions taken based mostly on any or the entire data on this writing.
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SLV shares had been buying and selling at $23.28 per share on Tuesday morning, up $0.33 (+1.44%). 12 months-to-date, SLV has declined -5.25%, versus a 0.92% rise within the benchmark S&P 500 index throughout the identical interval.
Concerning the Creator: Taylor Dart
Taylor has over a decade of investing expertise, with a particular deal with the valuable metals sector. Along with working with ETFDailyNews, he’s a distinguished author on In search of Alpha. Study extra about Taylor’s background, together with hyperlinks to his most up-to-date articles. More…