Silver Investing—Short-Term Trend Chart and Resistance

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.

Silver investing chart

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.

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