The Levels to Be Watching In Silver

While many point to the Federal Reserve as the tide that raises all ships, the boats carrying commodities have all but sank over the last couple of years. Silver ($SLV) has fallen nearly 30% since it’s 2014 high alone and made a series of lower highs and lower lows. It’s hard to argue against the notion that the Silver is in a bear market as each rally gets faded. We can also see signs of this bear market in momentum, with each march higher hitting a brick wall at the upper end of a bearish range.

Below is a weekly chart of the iShares Silver Trust ETF ($SLV) going back to late 2012. After a large drop in 2012 and 2013 silver began to consolidate at created support near $18. However, each rally was unable to get back above the 50-week Moving Average and momentum began defining the range for which it would eventually remain for the coming year. After multiple tests of the support at $18, price eventually broke through and tagged $15 for this ETF. As with many levels of support, once it breaks it often becomes resistance. Which is what we can see took place at the start of this year when Silver bulls tried to gain the majority. But they were unable to get the popular opinion and price failed at $18 and again was unable to break the 50-week MA.

Now with price re-testing $15 for $SLV we have a bullish divergence in the Relative Strength Index (RSI). We saw a similar divergence in June of last year before small rallies took place but ultimately failed. With the RSI making a higher low as price tests a prior low, this a potentially positive sign that price may begin to rally. What’s important to understand with this chart is the defined level of resistance in momentum. The bearish range that the RSI is in has put a quick end to any attempt to see price appreciate and we’ve yet to see the indicator break above this level yet.

Going forward I’ll be watching if the RSI can get materially above 50 and if price can once again break above $18 as well as its 50-week MA. This will likely not be an easy feat for Silver bulls to take on, but it’s important to know where ‘price memory’ is and the levels to keep an eye on.

SilverA second chart of Silver I want to take look at involves Sentiment. The chart below comes from SentimenTrader.com and is a proprietary mix of varies sets of sentiment-related data. As Silver consolidates near $15 I find it interesting to see sentiment begin to put in a series of higher lows from what is deemed an “excessive pessimism” level. Each test of this level in price has been accompanied by, what appears to be, less and less bearish sentiment. This may help give some self-esteem to the bulls as their camp begins to grow in attendance.

Prior rallies from $15 in $SLV have seen sentiment stop out around 60, if we do see price rally I’ll be watching to see if sentiment can break above these two prior highs as a possible sign that a shift in taking place in the Silver market.

Silver Sentiment

 

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Indianapolis Investors Meetup – March 5th

On Thursday March 5th I’ll be co-hosting with Tadas Viskanta, founder and editor of Abnormal Returns, the first Indianapolis Investors & Traders Meetup, sponsored by StockTwits.

If you are in the Indy area and want to come hang out, grab a drink, and meet some other traders we’d love for you to come. We’ll be meeting at the Upland Brewing Company (Carmel Tap House) from 5:30 to 7:30. For more details click here.

Stocktwits meetup MeetUp

 

Are Regional Banks Getting Ready to Breakout?

The Financial Sector has had a rough start to 2015, down 2.39% and is the weakest of the nine S&P sectors. With rates continuing to fall traders have not been showing much love to the banks. With weakness can come interesting chart setups and I think one is developing within a sub-industry of the Financials sector – Regional Banks.

For the bulk of 2014 we saw Regional Banks ($KRE) trade in a range between $41 and $37. However, last week we saw a strong bounce in the banks, climbing 8.5%. This comes as price bounces off the 100-week Moving Average and we see a test of support in momentum.

Currently the Relative Strength Index (RSI) has been making lower highs while also staying above ‘oversold’ territory and in a somewhat of a bullish range. If buyers continue to step in then we could see the RSI indicator break out from its multi-week down trend.

When I look at an industry within a sector I like to track how that industry is performing relative to its sector as well as the sector to its major index. As Financials ($XLF) have been under-performing the S&P 500 ($SPY) for the last year and a half, Regional Banks ($KRE) have been unable to keep up with Financials. Since the start of 2015 Regional Banks have begun to outperform the Financial Sector. Is this an early sign that Financials will also in turn begin to have better performance themselves?

regional banks

While $KRE has been in trading range for a year, this consolidation is occurring after an up trend, which is a bullish characteristic and could lead to another leg higher for the industry as the up trend does in fact continue.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.