As markets continue to defy the expectations of many bearish traders, one segment that is starting to capture their attention unlike any other is precious metals. As we'll discuss below, prices have regained major trendlines, which have consistently been used by traders over the past several years for determining the placement of buy and sell orders.
Recent breaks beyond key levels of resistance suggest that the bulls are in control of the momentum again. We'll take a closer look at some charts from across the segment to try and determine how traders will be looking to position themselves over the weeks and months ahead.
Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR)
Most active traders interested in gaining exposure to precious metals often turn to exchange-traded products such as the Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR). For those who are unaware, the fund's managers seek to reflect the performance of the price of a basket of gold, silver, platinum, and palladium bullion.
Taking a look at the chart below, you can see that the price of the fund has been trading within an extremely strong uptrend for the past year and a half. The selloff in March was quickly negated by the strong bounce over the past several weeks. Bullish traders will want to note how the price has regained its range-bound uptrend and how the trendlines are acting as guides for the placement of buy and stop orders.
Out of the group of precious metals, silver is the one that could gain the most attention from traders this week. As you can see from the chart of the iShares Silver Trust (SLV) shown below, the price has recently moved above the resistance of the 200-day moving average.
The combined strength and close proximity of the dotted trendline and the 200-day moving average (red line) suggest that the current level is an interesting place for bulls to take a position since it puts the risk/reward in their favor. From a risk-management perspective, stop-loss orders will most likely be placed below $15.83 to protect against a sudden shift in fundamentals.
Pan American Silver Corp. (PAAS)
With silver likely to be in focus this week, active traders will also be looking to top silver miners such as Pan American Silver Corp. (PAAS). Taking a look at the chart, you’ll see that the 200-day moving average has been an influential level for determining the placement of buy and stop orders.
The bounce off of the long-term support in May and subsequent break beyond the 2020 high has recently triggered a bullish crossover between the 50-day and 200-day moving averages, which is used by followers of technical analysis to mark the beginning of a long-term uptrend. Stop-loss orders will most likely be placed below one of the dotted trendlines depending on risk tolerance and investment horizon.
The Bottom Line
The attention of active traders is starting to turn to precious metals because of their tendency to act as a hedge to many market conditions. With the sharp rise in the markets over the past several weeks, the move suggests that the bulls could be losing conviction in the uptrend and that metals such as silver cold be in the early stages of a major move higher.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.