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Silver - Stuck Between a Rock and a Hard Place - But for How Long?

Chad Karnes

As a soft, white, lustrous transition metal, Silver is described as the highest electrical conductivity of any element and the highest thermal conductivity of any metal.  It is also defined as having a melting point of an incredible 1763 degrees Fahrenheit!  If you have been long silver then your blood pressure may also be approaching such elevated levels!  Silver has been slaughtered all year and has done nothing the last two months.

At the beginning of the second quarter, Silver's ETP price (SLV - News) was $31.38 and its Toronto cousin, Horizon's BetaPro Comex Silver ETP (HUZ.TO - News), was trading at $21.17.  Today, SLV is down 15% from March 30 at $26.65 and HUZ.TO is down a similar 16%.  Fortunately for silver bulls, the end may be near. 

The Rock and the Hard Place

There exists a very prevalent "Rock" and subsequent "Hard Place" for Silver.  The July 11 Profit Strategy Update outlines these two price zones which have kept Silver painstakingly confined the last two months.  As the chart below shows these areas have acted as key supports and resistances over the last year and will no doubt be important areas as Silver continues to muddle through the summer.

(to see larger version of chart click here)


For silver owners this means more waiting around until price can break out of the rock or breakdown into the hard place.  A breakdown in this area, as explained in the Profit Strategy Update, would setup further weakness with a potential for a very big and fast move down.  If Silver can breakthrough its long term resistance, it may be poised to resume its long term bull.  To take advantage of these potentials, aggressive ETPs such as the Proshares Ultra Silver (AGQ - News) or the Proshares UltraShort Silver (ZSL - News) can be used.

Silver's technical potential also aligns nicely with its bigger brother, Gold (GLD - News).  Gold also has a very strong support line that needs to hold or risk a significant decline.  If either of these breakdown, watch out below!  Potential ETPs to use to take advantage of whichever way Gold wants to break are the Proshares Ultrashort Gold (GLL - News) and the Sprott Physical Gold Trust (PHYS - News).

The ETF Profit Strategy Update for the days and weeks ahead outlines why bulls should be cautious in both Silver and Gold.  Each week the Update provides trades that maximize profits while minimizing risks by looking at key supports, resistances, and sentiment across multiple ETFs and indices.

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