Investor uncertainty and rising levels of volatility have dominated the public markets over the past couple weeks. As investors scramble for safety, traditional safe-haven assets such as the U.S. dollar, precious metals and other commodities have started to rise. Based on the charts of popular precious metal exchange-traded funds (ETFs), which currently offer some of the best risk/reward setups anywhere in the public market, we have tried to identify pockets of strength that traders can use to their advantage over the days and weeks ahead. (For a quick refresher, check out: 3 ETFs for Trading the Spike in Volatility.)
Sharply falling equity prices over the past several trading sessions have many retail investors eyeing the exit. From a technical analysis perspective, the timing of this move couldn't be more interesting given the long-term ascending triangle that has been forming on the chart of the SPDR Gold Shares ETF (GLD). This pattern is one of the most common consolidation patterns, and the defined entry point makes it one of the most predictable. Given the position within the pattern and the significant declines in recent days, most traders will anticipate a break beyond the support of the dotted trendline. Given the height of the pattern, target prices will likely be set near $150, while stop-loss orders will be placed below the 50-week or 200-week moving averages to protect against a sudden sell-off. (For further reading, check out: Gold May Jump Over 20% as Investors Eye Inflation.)
Retail traders who look for exposure to silver generally turn to the iShares Silver Trust (SLV). Taking a look at the chart below, you can see that the metal is trading within a symmetrical triangle pattern and the price is currently in the process of testing the combined resistance of the upper trendline and its long-term moving averages. Given the sharp rise in global market volatility, investors could flock into silver, and a close above the mentioned support would likely trigger a surge toward the 2016 high near $20. (For further reading, check out: How Safe Are Gold And Silver Investments?)
As one of world's rarest minerals, platinum is often regarded as a natural hedge against falling equity prices. Taking look at the chart of the ETFS Physical Platinum ETF (PPLT), you can see that the 50-day moving average recently crossed above the 200-day moving average. This bullish crossover is known as the golden cross and is one of the most popular long-term buy signals used by technical analysts. This crossover is generally used to mark the beginning of a long-term uptrend, and the nearby support of these levels offers an interesting risk/reward for long-term traders. Short-term traders may want to hold out for even more of a pullback toward the support level, but they run the risk that the pullback doesn't play out as expected. (For more, see: 8 Experts See Long-Term Glitter in Gold.)
The Bottom Line
Chart patterns on precious metals such as gold, silver and platinum mentioned above are all trading near long-term inflection points. Entries near the mentioned support could be lucrative for active traders looking to profit from the rise in investor uncertainty. (For further reading, check out: Using Technical Analysis in the Gold Markets.)
Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.