Silver bullion and related exchange traded funds have been steadily weakening over the past three years but the market may be at an inflection point.
Year-to-date, the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) fell almost 20%.
However, looking at the monthly performances, silver is forming what technical analysts call a “doji star,” writes Greg. Harmon, founder and president of Dragonfly Capital Management.
The doji candlestick formation on the monthly performance of silver looks like a vertical line crossed by a horizontal line, indicating that the market open and close are nearly identical. Typically, the cross or plus sign occurs when buyers and sellers more or less cancel each other out, marking indecision among investors. After a prolonged trend, the star formation may be a signal of a turn in momentum.
As the silver charts show, prices have remained in sideways trading, with prices relatively unchanged since the start of December.
Additionally, Harmon points out that the doji star is forming at the lower Bollinger Band – a chart band that signifies two standard deviations away from the simple moving average. Since the current market uncertainty is trading near the lower end of the band, technicians may argue that the market is hovering near oversold territory.
Silver’s monthly chart is also trading at the 78.6% Fibonacci retracement of the long run higher, Harmon added. The Fibonacci retracement may indicate a potential retracement or reversal of the asset’s original trend.
After a steep multi-year decline, silver prices have also rallied considerably higher, writes Gary Christenson for Investing. For instance, similar crashes of 64%, 46%, 51% and 68% since 1986 have been followed by periods of strength.
iShares Silver Trust
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