Summary:

  • There is a potentially explosive technical setup in Silver.

  • The Gold/Silver ratio is testing key resistance and Silver may outperform gold in the coming months.

Looking at this monthly chart of silver, how can you not at least be preparing a long trade?

This thing looks damn near ready to explode to the upside.  That doesn’t mean it will.  But if it does, any portfolio manager who isn’t long in some way, is going to look stupid.

silver
Chart via StockCharts

Trade Strategy

At this point you can get long the metal and put a stop below 14.50ish .  Our first target area is that upper 18’s-19 area that was the old 2010 high and 2014 low.  The setup is powerful enough to take that level out.  If that is the case, we could easily see a move to 26 by the end of this year.

There are so many ways to play it, whether it be mining stocks, futures or an ETF like SLV or leveraged funds like AGQ or USLV.

How I’m Playing It

So, as a swing trader, how am I playing it?  I’m starting to dabble in 3x Silver long USLV.  In a levered fund that decays over time, there is no point in being aggressive until we see a momentum buy signal trigger.

The time to get very aggressive with sizing is IF Silver futures break above the February high at 16.  Then as we approach the first measured target area in the high 18s, we can take that excess size.

Ready To Outshine Gold?

Detractors may suggest that Silver has notably lagged Gold of late and that sure is the truth.  In fact, it has now underperformed Gold for FIVE years.

gold silver

The underperformance has taken the ratio all the way back to 2008 panic levels.  If there is a place this ratio will turn the corner, it’s around these levels.  It wouldn’t be surprising to see Silver start to meaningfully outperform gold in the coming months.

Thanks For Reading.  Trade ’em well.