Silver and SLW

Silver on a very large time frame has started changing trend.  Bigger than a super tanker and slower, it made a nice cup type bottom that took about a year to form.

Silver macro chart 7-24-16

The move up from January –April of 2016 defined the cup.  The pullback from April-June made a nice handle, which came neatly to 50% of the up impulse.  And then from 6-13 to 7-5, the impulse completed to a level of historical resistance.

Silver cup bottom

What’s next for silver? 

The completion move of the impulse out of the cup bottom is actually bigger than the first impulse.  A trend!  So the new impulse should be considered on it’s own merits.  Bread and butter situation.  Look for a 50% pullback of the new impulse.

Silver summer 2016 impulse

I’d been interested in silver for a long time.  My biggest macro play win of my life was SLW, which could also be seen as my biggest loser, since I bought it at $1.75, rode it to $47.60 (not watching) then back down to $10.

I started watching it in Nov of 2014, so the ride from $22 ish to $10 is part of my conscious doing.  I held it back to $25, then sold it.  I’d like to buy it again at $18.

I also have some physical silver.  And am interested in silver as a commodity, due not only to its precious metal component, but its industrial utility, and therefore both direct and indirect correlation to global economic health.

Gold has only indirect utility, since theoretically people buy it when they are afraid about the economy.  Whether or not that is true, it is a reflection of dollar strength, which is related to economic strength factors.

Sliver Wheaton, SLW, is a mirror of silver, but it’s not precise. Technically, it’s every bit as pretty.

Here’s why I sold SLW at $25 after all these years.

SLW macro 7-24-16

Admittedly, I was a dollar or two early (or more, time will tell.)  But it’s the conjunction of the major down trend line, and the top of its current up channel.  It’s coming in to the bottom of a resistance level, and has had no major pullback of the uptrend off its low.  I think it’s overbought.

If we compare SLW to silver itself, in terms of absolute price, it overshot to the downside when it went to $10, while silver was $13.76.  And now it’s overshot to the upside.  So in a sense, it might be considered a leveraged play on silver, which also gives a dividend.

The 50% level to the upside is certainly a target at $28.67.  However, silver itself isn’t even close to 50% of its down move.  So my guess is that SLW is due to correct.

Where will it correct to?  I suspect the up channel will not hold, although the first touch probably will.  So it could work for a short term play.  But for the bigger picture play, you know the tune.  Throw the old fib on it.

The 50% and 61.8% levels are neatly clustered around some visual support and resistance areas.

SLW fibs on up impulse 7-24-16

Other things of note: look how the range from $18 -28 ish is neatly sandwiched between the 50% of the down move, and the 50% of the up move.

If we zoom way back out again, note how this $18 ish level was first resistance in 2008, then support in 2010, then again support from 2013-1015.

SLW $18 level

This recent move is noteworthy in that it only paused briefly below $18.  Relatively briefly, 6 weeks.  Then again used the level as support for exactly 6 more weeks.  SLW seems ready to leave this level behind.

What do you bet that SLW will fall to here one last time, while silver has already resumed its upward move?  So that silver is above $18 when SLW gets to it?  If that happens, I’d be a a buyer in size.


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