I am a long-term bull on silver. And when I say long-term, I mean ten years or more. That’s ten MORE years, not ten years total. Since I have accumulated a fair amount of physical silver as part of my Wealth Insurance Policy against the probability of high inflation in the U.S. and possibility of total economic chaos, I invest short-term in “paper silver.” For short-term silver investing, I use technical analysis rather than fundamental analysis. My favorite “paper silver” investment vehicle is silver ETFs and options on silver ETFs. In the past 12 months I have used SLV, AGQ, and ZSL.
My long-term and mid-term view of silver is based upon macroeconomics. I believe that the world economy will suffer a meltdown in this decade, and when it does, there is a significant chance the price of silver will swoon. Therefore, my paper investing is short-term.
Below is a 1-year chart of the closing price of silver on the New York Exchange. During the short-term downtrend labeled “trend 1” I shorted silver via options on an ETF once and via a leveraged reverse ETF, ZSL, once. I also went long silver once. Two of the three trades made a nice short-term profit. The third lost a little.
Look at the price chart during the last week of January and the first half of February. Price made a top short of price resistance at $35.42. It looked to me like it was rolling over and headed back down. I lost a little trying to pick the top.
During the last week the price of silver has shot up and closed at $35.57, 15 cents over previous resistance. Does this mean price will continue to move up until it meets resistance of the mid-term downtrend line labeled “trend 2”? Not necessarily. Some Chartists believe a close of a penny above former resistance is significant. Many of us believe charting provides a price range. Many things affect the closing price. The last trade of the session sets the closing price. Is the last trade of the session always made by a rational person? I think not.
However, if price holds above for a couple of days, or even better, continues higher, the next resistance is the mid-term downtrend line labeled “trend 2.” If price breaks through that, the next resistance is the former price highs in the $43 – $44 range. It’s time for short-term silver investing traders to go long.