Silver Testing $30/oz, Jumps +20% In AugustSilver is up roughly +60% since the beginning of July from $18/oz to a current price of over $29/oz. Price has seen strong gains ever since breaking above $21/oz which was the upper level of a long-term consolidation/accumulation range that lasted from 2014 through last month. Last month price peaked right at the $26/oz level which stems from price support seen back in 2011 and 2012, and this month price has surged above that level and is now testing $30/oz.
The two most recent price candles are yellow which indicates that there is bullish momentum volatility behind price, or extreme trader optimism. Green price candles indicate bullish momentum behind price, purple candles indicate bearish momentum and gray candles indicate no momentum, or neutral. In general, you want to continue holding when the price candles are yellow and add to trades on any pullbacks. The best place to put a stop-loss order is below the first yellow candle which is July's candle, and the bottom of that candle is down near $18/oz(blue line). The reason for this lower stop-loss level is to allow for downside volatility after such a strong and fast move to the upside over the past two months. Once a pullback occurs we would want to see price remain above the blue line at $18/oz, or more ideally, a hold in price above the upper orange line at $26/oz. $26/oz seems like the most likely candidate on any potential pullback considering how strong of a support level it was back in 2011/2012.
The Relative Strength Index(RSI) shows the green RSI line rising above the purple signal line which indicates short-term bullish momentum on a monthly basis. The green RSI line is also above the 50 level which is the midpoint of the total RSI range(0-100). In general, price is considered to have bullish momentum when the RSI is above 50 and bearish momentum when below 50. In general during an uptrend, you want to see both the green RSI line and purple signal line both rising and trending above the 50 level. The purple signal line is currently just below 50, but it is slower to react to short-term price movement than the green RSI line. By the looks of it, the purple signal line should be above the 50 level by the end of this month indicating bullish momentum in the intermediate-term.
The Price Percent Oscillator(PPO) shows the green PPO line rising above the purple signal line, and both lines are trending above the 0 level. When the green PPO line is rising above the purple signal line it indictes short-term bullish momentum behind price. When both lines are trending above the 0 level it indicates bullish momentum behind price in the intermediate-term.
The Average Directional Index(ADX) shows the green directional movement line above the purple directional movement line which indicates a short-term postive trend hind price. When the green directional line is above the purple directional line it is considered bullish for price trend, while the purple directional line above the green directional line is considered bearish for price trend. The histogram behind the two directional lines represents trend strength. When the histogram is green and rising it indicates increasing strength in an uptrend. When the histogram is purple and rising it indicates increasing downtrend strength. This histogram is now rising as of this month and is green which indicates that the current short-term bullish trend in price is gaining strength on a monthly basis.
The overall view on silver remains bullish, but price feels like it's getting away from itself these past two months and gaining too much, too fast. With the little resistance price has seen since $20/oz, I'm expecting $30/oz to be a short-term resistance level even if we get an overshoot to $31 or $32/oz. As stated above, likely support will come in around $26/oz on any pullback with lower support from there at the upper orange line of the consolidation range at $21/oz.
I sold GDX and GDXJ this week since they were the two biggest laggards in my porfolio. Mining ETF's are safe plays, but tend to underperform individual mining companies during bull markets. I replaced GDX and GDXJ with GORO, IAG, FCX and AUY. I continue to hold GPL, HL, EXK, AG, KGC, MUX, CDE, NGD. Total mining portfolio is up +55% since May with GPL, EXK and HL all up over 100% in that time. "Worst" performer is NGD at +35%.
