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Category Archives: SLV
Silver Update: March 2018
On May 5, 2011, when the iShares Silver Trust (SLV) was trading at $33.72, we said the following:
“…we’d like to see the price decline to the dashed blue line at $15.41 or below.”
On March 12, 2017, we said:
“From what we can tell, there are only two remaining downside targets. The first is the January 2016 low at $13.74 or –19.31% from the March 10, 2017 closing price. The final low is at $9.02 or –47.03% from the March 10, 2017 close.”
The closest that the price of silver has come to $13.74 is the July 7, 2017 low of $15.34. Below is the revised update on the price of silver and our expectations going forward.
Silver: December 2017
Below is a comparison chart showing the price of silver since 2012 and our view on the direction of the “poor man’s gold.”
Silver Update
On May 5, 2011, when the iShares Silver Trust (SLV) was trading at $33.72, we said the following:
“…we’d like to see the price decline to the dashed blue line at $15.41 or below.”
Silver: Downside Targets Met
As early as May 5, 2011, when silver was trading at $35 an ounce, we’ve maintained the view that the prospect of silver, in the form of the exchange traded fund iShares Silver Trust (SLV), falling below $20 was well within the realm of possibility (article here). At the time, we said the following: Continue reading
Posted in Charles H. Dow, Dow Theory, Edson Gould, iShares Silver Trust, Silver, SLV, speed resistance line
Tagged members
Gold Stocks Near New Low
This is the list of gold related equities that we track within 10% of the one year low. We strongly recommend that you do your own research on these companies and assume that the downside risk is half of the current price, at minimum.
Precious Metals Follow-Up
Silver
On February 11, 2012, we wrote a piece on Silver and SLV titled “Correction of Errors on iShares Silver Trust (SLV) Interpretation” (found here). In that article, we said the following:
“The current indications suggest that SLV will fall as [low as] the $22.14 support level. Because silver easily fell to the third support level in the period from 2001 to 2008 (within the context of a precious metal bull market), we expect that the $21.02 is a realistic worst case scenario to watch for. We will consider buying silver and related derivatives at $22.25 and below.
“We view the most recent rise from the December 2011 low as running out of steam.Therefore, the rising resistance level established at $28.70 appears to be firmly in place…for now.”
As seen in the chart below, Silver has declined to the rising support level of $21.02 in many instances but broke through to the downside on February 18, 2013.
From a technical standpoint, the next downside target for silver may be to the $20 level if the current levels don’t hold. However, under typical circumstances, any point below the $21.02 level is considered undervalued. While it is possible that Silver could fall further we don’t play the short side since we’re in the position to accumulate good values. Values at this point trump the guesswork of when to enter and exit the short. We believe that anyone interested in the upside potential to silver should thoughtfully accept the potential loss of –50% or more and purchase in two stages, once at a predetermine price at or below the current level and a second time at or below the first purchase.
Agnico-Eagle Mines (AEM)
On April 6, 2012, we recommended the consideration of Agnico-Eagle Mines (AEM) (found here). On September 25, 2012, we recommended selling of AEM (found here). While we got a lot of heat from readers of the SELL recommendation, from the less than brilliant to the reasonably rational, our work has proven that precious metal bull markets are vicious and should not be taken lightly.
After our recommendation of AEM on April 6, 2012, the stock rose nearly +40%. When we gave the sell recommendation of AEM on September 25, 2012, the stock increased an additional +11%. However, as of April 12, 2013, AEM is down –27% from our sell recommendation and down –37% from the November 2012 high at $57.33.
Never under-estimate the power of a gold bull market. We hope that our work on this topic has been instructive.
Correction of Errors on iShares Silver Trust (SLV) Interpretation
In our previous reviews of the iShares Silver Trust (SLV) (found here), we attempted to apply Dow Theory to the price movement of SLV. However, we have made an error in our analysis that has resulted in arriving at the wrong conclusion of the price potentially declining to the previous low that was established at the beginning of the bull market run on November 21, 2008 at $9.02.
Instead, we are revising our analysis to reflect that the price of silver may decline as low as $21.02 if it were to replicate the rise and decline from October 2001 to November 2008.This revision should provide a more qualitative view on the future prospects for both SLV and the price of silver.
As background to the error that was made, we first must explain that the iShares Silver Trust (SLV) is supposed to track the price of silver. However, SLV has only been in existence since April 2006.Our Dow Theory analysis of SLV was incorrect because we didn’t have an appropriate starting point, the previous low, to arrive at a correct downside target. The previous low occurred in 2001 which was long before SLV began trading.
This resulted in the mistaken belief that SLV should be expected to go back to the low of 2008 at $9.02. To remedy our error, we have obtained the price of silver from the last major low in the price, and re-ran our Dow Theory analysis. The chart below provides the three downside targets from the March 17, 2008 high of $20.99.
The downside targets from the peak were as follows:
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$15.33
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$12.51 (50%principle)
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$9.68
In the final outcome, the price of silver fell below the third downside target of $9.68, ultimately resting at the $9.02 level before making the ascent to the recent high of $48.35.This sets the stage for our analysis of the current price action.
Our current Dow Theory analysis involves the period from the November 21, 2008 low at $9.02 to the peak of April 28, 2011 at the $48.38 level. The downside targets are as follows:
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$28.70 (50%principle)
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$22.14
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$21.02
It should be noticed in the chart below that as time passes, the support levels increase which exerts greater pressure on the price to either rise substantially or breakdown.
Despite the revision to our numbers, our previous analysis about the expected outcome has remained accurate.Our May 5, 2011 article was on target with the claim that SLV would trade in a range before falling much further. SLV traded in a range until mid-July and ultimately fell as low as $26.16, a drop of -30.87% since that article was written.
The current indications suggest that SLV will fall as the $22.14 support level. Because silver easily fell to the third support level in the period from 2001 to 2008 (within the context of a precious metal bull market), we expect that the $21.02 is a realistic worst case scenario to watch for. We will consider buying silver and related derivatives at $22.25 and below.
We view the most recent rise from the December 2011 low as running out of steam.Therefore, the rising resistance level established at $28.70 appears to be firmly in place…for now.
Posted in Dow Theory, Error, gold, iShares Silver Trust, SLV
iShares Silver Trust (SLV) Update
The iShares Silver Trust (SLV) ETF has fallen in line with our assessment from May 5, 2011. However, it is times like these that we get nervous about our ability to believe that the price action of SLV will continue on a forecast that was presented over six months ago. Back in May, we said the following:
“…we should see SLV tread water for a brief period of time before falling back to the prior low which began with the current run back in November 2008. Dow Theory suggests that a reasonable buying opportunity would exist at [or] below line B (blue line B).”
Currently, the “blue line B” is around $24.31 and rising as time passes. In our May Dow Theory interpretation of SLV, the price fell right through line B in 2008 without any hesitation. We’re not so certain that such action will occur this time around. As long as SLV can hold above the Dow Theory fair value of $28.15, there is a good chance silver will be able to rebound in a meaningful fashion. However, closing below $28.15 (again) could be a confirmation of the downtrend.
Many precious metal enthusiasts are arguing that what happened in 2008 was an outlier event for silver and therefore is unlikely to happen this time around. It is hard to argue against such a view. However, it is difficult to get the period from 1974 to 1976 out our mind (visual here) when gold fell 50% and gold stocks fell 66% in the middle a gold bull market.
Below is our updated chart of SLV reflecting the most recent price action:
The Punchline: If you like the idea of investing in silver, then a buying opportunity should be at/or below the blue line B ($24.31). However, don’t go all in, just in case the dashed blue line does materialize at $17.
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iShares Silver Trust (SLV) Debrief, May 5, 2011
iShares Silver Trust (SLV) Debrief
On April 14, 2011, we provided what we believed to be the downside target for the Philadelphia Gold and Silver Index (XAU) in anticipation of the current decline that is taking place using Edson Gould’s speed resistance lines (article here). Although appearing to be very similar, there is a distinct difference between Gould’s resistance lines and Charles Dow’s 1/3 support levels. Gould’s lines have support levels based on 1/3 of high while Dow’s support levels are based on 1/3 the difference between the prior bottom and the most recent high.
In this review we’re going to tackle the trading pattern of the very controversial iShares Silver Trust (SLV). In the chart below we have drawn the Dow Theory support levels where the price of iShares Silver Trust (SLV) is likely to revert to as part of a normal reaction. As a point of clarification, according to Dow Theory, a bear market does not begin until the index or stock falls by at least 1/3 of the prior rise. In the case of (SLV), today’s closing price at $33.72 heralds what is sufficiently below the first support $34.52 and should be considered to be a bear market.
Although this could be considered a bear market based on Dow Theory, we only need to look back to 2008 to know how quickly and viciously a bear market in precious metals can begin and end. The precious metals bear market of 2008 crushed the XAU gold and silver stock index with a 68% decline in eight months. During the same time, the iShares Silver Trust (SLV) declined slightly more that 55%.
Bear market or not, some observations are worth considering. First, in the chart below, the overall pattern of the price decline in (SLV) for the Dow Theory indication numbered 1 (in green) is very similar to the current decline represented with the Dow Theory indication numbered 2 (in blue). Since Dow Theory works on a relative basis, once initiated at a major low, the signals provided are not confused through the distortions of large or small numbers. Headlines about SLV having declines of historic proportions are grossly exaggerated if there is no comparison on a percentage basis and compared to prior declines.
Second, at the beginning of each run at point 1 and 2, the price of SLV bounced off of the middle line B (also known as the 2/3 support line) before going parabolic.
Finally, the decline from each peak was rapid and vicious. One-third of the prior rise was wiped out in a matter of days after the peak.
What remains is a high level of uncertainty for (SLV) going forward. However, in general, we should see SLV tread water for a brief period of time before falling back to the prior low which began with the current run back in November 2008. Dow Theory suggests that a reasonable buying opportunity would exist at below line B (blue line B). However, we wouldn’t jump in at the slightest move below line B. Instead, we’d like to see the price decline to the dashed blue line at $15.41 or below.
Posted in Dow Theory, Edson Gould, gold, iShares Silver Trust, Silver, SLV, XAU
Sundry Items
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Biogen Idec (BIIB) and Teva Pharmaceutical (TEVA) are doing a dance as both are members of the Nasdaq 100 index. As one stock is at a new high the other is reaching a new low. The two-step that is being done by the stocks is quite amazing. Back in October 30, 2009, we pointed out that the concentration of biotech stocks at a new low meant that they were possible takeover candidates. From that list in 2009, GENZ and CEPH were actually tendered buyout offers. 3 of the remaining 5 biotechs have had gains of 40% or more since then. The remaining two stocks, Amgen and Gilead Sciences, are essentially at break even. BIIB has been the leader in terms of price appreciation with a gain of over 100% since October 30, 2009. At that time TEVA was near a new 52-week high. However, BIIB’s recent success is actually impacting the performance of TEVA since both companies are involved in the development in MS drugs. TEVA is now on our new low list for the Nasdaq 100 and should be consider as a top acquisition candidate for your portfolio. Anyone who bought BIIB based on our watch list from October 2009 should now consider securing a large portion of the gains and possibly funding the purchase of TEVA with the proceeds.
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Our September 5, 2009 article titled “Silver Should be the Focus” recommended that anyone interested in investing in gold should instead put there investment funds towards silver. The chart below reflecting the silver (SLV) and the gold (GLD) ETF demonstrates the accuracy of our recommendation and highlights what we believe is likely to come. Those interested in determining an entry point should reference our latest article on April 14, 2011 highlighting the downside targets for precious metal stocks based on the Philadelphia Gold and Silver Stock Index (XAU).
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The results are in and our article titled “A Comparison Between Dividend Strategies” has demonstrated, so far, that the New Low approach has returned 19.52% while the list of stocks we compared ourselves to has returned only 1.39%. We believe that, although the two list have similar companies, the quality and timing has made the difference in performance. As a note, we only made the comparison because the author of the other list indicated that it was for the purpose of trading. In our view, stocks that can be considered for trading are worth comparing since we only aim for 1-year performance.