Monday, July 11, 2011

Market Watch: SLV

The silver ETF SLV had a pretty good week last week. In the post apocalypse $32.50 has established itself as support and you can see how we bounced off of that level again last week. But it's not clear that this is the beginning of a new run-up, in fact nothing is clear about SLV right here.

Looking at the chart you can see how the 100 day moving average provided support once in February and then again in May. SLV finally gave up it's 100 day last month and now is approaching it from underneath. In fact you can see how the 50 day moving average 100 day moving average and the SLV itself are intersecting at Friday's close, with the 50 day rolling over and turning down. This is a moving average crossover and it portends a new bearish trend. So, whatever SLV does in this zone is very important. Healthy stocks that are going up trade above their 100 day moving average. I would not go back into SLV on the long side unless and until it breaks well above its 100 day moving average. It's as simple as that.

On the other hand I wouldn't go short until a break below $32.50. That is the closest thing to support we have with roughly three touches since March. The next closest thing to support doesn't occur until around $25.

The next move is up to SLV and it will occur right here at $35.75. Will SLV breakout above its 50 and 100 day moving average crossover, or fall back to $32.50? The signals are mixed.
The stochastics are going up and still have room to go, but not much and the volume is very light. Fortunately we don't have to guess we can watch and wait for an entry point.

So, we are watching $32.75 and above for long and $32.50 and below for short.

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