Another commodity is setting up for a low risk entry. I am talking about Silver which is displaying somewhat similar characteristics as the JO – Coffee ETN displayed recently. The thrusting move is not as strong as with JO and volume is not convincing enough as of yet. Still, the potential bear trap and the subsequent gap up I describe in my chart annotation is indicative of buying pressure. I think we could very well be witnessing another beautiful ABC pattern in the making. If my analysis is correct the downside with SLV is less than 10% as the recent gap should act as support. When I say support it certainly allows for price to dip back into the gap area. But the gap should not be completely filled or retraced. To make a long story short, the set-up is interesting because it is very easy to define at which price level the rationale for a long position is not valid anymore and the trade should be closed. Instead of going for SLV – Silver ETF those with a somewhat greater risk appetite can buy AGQ – 2x Leveraged Silver ETF. I decided to go for an initial position with AGQ. USLV – 3x Leveraged Silver ETF is only for those with a pronounced risk appetite.
SLV – Silver ETF. Click on the chart to enlarge:
Conclusion: Not quite the picture perfect initial thrusting move within a potential ABC move due to lack of volume. Still, the bullish flag now building is compelling and offers a rather low-risk long entry. If volume starts to come in a 15 – 20% price move to the upside with SLV should be feasible. That price target would coincide with the big gap printed roughly a year ago.
You need to determine why the winners are winners and the losers are losers. Once you can figure that out, you can become more selective in your trading and avoid those trades that are more likely to be losers. – Randy McKay
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