Bullish chart patterns across the commodities spectrum over the past several weeks have had active traders chomping at the bit and ready to profit from a strong move higher. However, lackluster results of late have just frustrated many and in turn sent them on their way to look for gains in other sectors. In this article, we'll take a closer look at several silver-related charts and suggest why it is likely too early to give up on silver's move higher.
iShares Silver Trust (SLV)
Keeping a close watch on the price of exchange-traded funds such as the iShares Silver Trust (SLV) is one of the most popular ways for active traders to gauge the momentum of physical silver. As you can see below, the price has experienced a significant pullback from its peak earlier this year. While the sell-off has been hard to stomach for those already in a position, those who have yet to enter may be more enticed than ever due to the nearby support.
Bullish traders will likely look to enter positions as close to current levels as possible and set their stop losses relatively close below the dotted trendline. The lucrative risk-to-reward ratio could be enough to stir interest among those who have been on the sidelines and could be the catalyst for a move higher. It's quite possible that Monday's close of $14.08 will look like an ideal entry several weeks from now should support levels hold.
Southern Copper Corporation (SCCO)
Bullish price action so far in 2019 on the chart of Southern Copper Corporation (SCCO) has sent the price above its 200-day moving average. Followers of technical analysis often look to long-term moving averages to get a sense of the long-term trend and for determining the placement of their buy and stop orders.
What is of specific interest at this point is the bullish crossover between the 50-day and 200-day moving averages (shown by the blue circle) at $37.60. This common long-term buy signal is often used to mark the start of a major uptrend, and a couple days of selling could be presenting traders with an ideal entry position. From a risk management perspective, traders will likely maintain a bullish outlook until the price closes below the long-term support levels, which would also likely coincide with a shift in underlying fundamentals.
Pan American Silver Corporation (PAAS)
As you may know, there are a limited number mining companies with exposure to silver. Followers of the silver market are likely well versed in the operations of Pan American Silver Corporation (PAAS). With over 280 million ounces of proven and probable silver reserves and cash costs of around $3.35 per ounce, it is one of the world's leaders in the field.
Taking a look at the chart, you can see why the bulls have been frustrated as of late. The pullback near the 2019 highs of $15.50 has left most who have opened a position this year with a paper loss. However, notice how the price is nearing the support of an influential trendline. This chart suggests that the bulls may be more interested at $12.50 and could be gearing up to open positions at current levels so that they can set a tight stop loss in case of a continued sell-off. The price action over the coming few sessions will be of upmost importance because it could set the tone for the coming weeks or months.
The Bottom Line
Silver is one of the commodities that has shown the most promise so far in 2019. However, recent selling pressure has put the run higher into question, and many traders have started to look elsewhere. Based on the nearby support levels shown on the charts above, it could actually be the best time to buy silver-related assets rather than looking for profits elsewhere.
At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.