Silver update II?

I just wanted to do another quick follow-up on silver. I have been following the movement of silver, and gold, for the past few months in expectation of a downside reversal. The metals have continued higher, but has the party finally ended?

Please review the following chart of silver with my added notations:

Over the past several months, silver has been bouncing along the up-trending support line I have drawn. Silver has approached this up-trending support line again, so might that be a point of entry for a long position? What if that trend line were to break?

I have an opinion: I think silver is going to break lower. Why? Please review the silver ETF SLV that I have shown below:

First, the SLV has already broken its support level. Next, you will notice that both volume and momentum (MACD) have been negatively diverging from the rising price of the SLV. So, it looks to me like silver is preparing for a move lower, but you be the judge.

The Tale of the Tape: Silver has pulled back to its support line again. If you are bullish on silver, you could enter a long position on silver or the SLV. However, the SLV seems to be flashing signals of trouble on the horizon. So, if you are bearish on silver, you could enter a short position on silver, the SLV or go long the ZSL for a short-term trade. Similar trades on gold could also be made.

Waiting for the most opportune times that I have outlined above could provide you with higher probability entry points. No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.

Good luck!

Christian Tharp, CMT