Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  

  • Other news: News from PR Newswire
| More

Look at these ETF Charts SLV ZSL Before Calling a Top in Silver

Thu, Apr 21, 11:41 AM ET, by Corey Rosenbloom

Are you trying to call a top in silver?

You’re not alone – I’ve been picking up on a lot of chatter in the blog (and email) world about traders and analysts trying to call that proverbial “top” in Silver “any day now.”

Before you can’t fight the temptation any longer, at least take a look at these four charts – Two Daily and Two Weekly – of major Silver ETFs SLV (bullish) and ZSL (ultra-bearish).

Let’s start with SLV Weekly for our reference:

In this post, I’ll specifically be focusing on a few key chart points:

1. Bernanke’s “Jackson Hole” Speech that introduced us to QE2 on August 27, 2010
2. The “Weekly Pullback” to the 20 EMA in January 2011
3. Volume and Momentum Insights

I need not remind you that Bernanke’s QE2 speech (“We will do anything to prevent a second recession”) helped kick-off the inflationary commodity rally we’re seeing now – but that’s completely another story.

Second, the “Weekly Pullback” in January was an interesting topic, as the daily chart (as you’ll see) had plenty of warning signs of a potential “top” and “reversal” that was shortable … but wound up being nothing more than a clean and easy pullback (retracement) to the rising 20 week EMA – an intermediate term BUY signal.

In terms of momentum and volume, we’re seeing CONFIRMATIONS from both instead of negative divergences on both the weekly and daily frame – that is a sign of likely price continuation.

Now let’s flip down to the daily chart:

Again, we can see the “Blast-off” in price at the end of August which coincided with Mr. Bernanke’s QE2 announcement (which would begin officially in November, though markets tend to move ahead/in advance of actual events).

The MAIN IDEA with the daily chart is what happened in the run-up to January 2011.

Generally, if you’re going to call a top, it’s best to wait for confirming signals of potential trend reversal.

These include lengthy negative divergences in both volume and momentum (which were present as shown) and then triggers from price in the form of breakdowns under rising price trendlines (hand-drawn) or moving averages (such as the 20 or 50 day EMAs as shown above).

So, if you’re going to call tops, it’s best to wait for triggers that form AFTER divergences or some other non-confirmation are present.

Even with all that bearish wind at traders backs, SLV (silver) did not reverse, but instead just pulled back to the rising 20 week EMA (higher timeframe support) and launched up from there.

This is a key point in Multiple Timeframe Analysis – wherein the daily (or short-term) chart can signal a clean reversal… which turns out to be nothing more than a standard pullback on the Weekly (higher) frame.

Anyway, with Silver shaking off that potential reversal signal in January, the next BUY signal came on the breakout to new highs in February above $30 per share (roughly $3.00 per ounce).

I’ve posted many times that the two leading trading strategies in strongly up-trending markets are retracements to rising EMAs/Trendlines or price Breakouts to new chart highs.

What we’re seeing now is the remainder of the current rally which – again – is confirmed with bullish surges in volume and momentum – these are things you do not use as bearish short-sell catalysts.

A main point from the current chart is that, while there is not a corresponding buy signal (as in, no breakouts above pre-existing resistance and of course no pullback to support), there is – as of this moment – NOT a bearish short-sell signal (given that price is rising and overextended… but overextension alone is not a reason to short).

Now, let’s flip the tables and move away from the Bullish SLV chart to the Ultra-Bear (2x leveraged) ETF – ZSL:

Before getting too deep into the chart, keep in mind ProShares announced a 10 to 1 Reverse Split for ZSL on April 14th, 2010.

The long-term fate of leveraged inverse ETFs almost always means a trajectory headed to $0 per share … which is why they will have to CONTINUE reverse-splitting most leveraged inverse ETFs every few years (particularly if there are strong rallies in the underlying market) … but that too is another story.

I’m really showing this chart for comparison purposes, and as a reminder that double or triple leveraged inverse ETFs are for very short-term (perhaps only intraday) trading purposes – you should not invest long-term in leveraged inverse ETFs.

The main point of this chart is the literal surge in volume in 2011 – which one would assume is a rush of risky/aggressive traders seeking to profit from a potential top in silver.

So far, that has been a losing bet, as seen from the daily chart:

Again, I’m just going to focus on a few things.

First, when Bernanke announced the initial QE2 plans in August 2010, ZSL sold for $140 per share. Today, it’s at $15 per share. That’s a 90% decline and – mark my words – ZSL will NEVER see $140 per share again (without a reverse split).

Let’s assume silver fell from $40 per ounce to $20 per ounce – a 50% decline.

One would thus assume the ZSL – a double-leveraged inverse fund – would increase 100% which is an enviable gain.

$15 per share times two (increased 100%) is $30 per share.


Anyway – again this topic is a huge issue for another conversation, but it underscores the importance of reading an ETF’s prospectus (and doing your research) carefully before purchasing an ETF.

Moving on – the surge in volume from March to present either indicates that more people are now aware of the ZSL fund… or that more people are finding shares just too irresistable to snatch up a position that will rally a large percentage gain (but NOT large share price gain – certainly NOT back to $140 per share or even $100 per share) in the event Silver does top soon.

Now going back to the main point – our weekly pullback phase in January (when it looked like Silver had topped on the daily chart) led to a ZSL move from $40 to $50 per ounce (a 25% gain) but now price is 70% lower ($50 to $15) and still declining.

To make a long story short, any type of trend reversal strategy is inherently more risky than playing for trend following strategies – given the foundation of technical analysis is built on the notion of trend continuity.

Martin Pring (Technical Analysis Explained) defines Technical Analysis as:

“The Art of identifying a trend at its earliest stages and riding that trend [trading in the direction of the trend] until the weight of the evidence proves that the trend has reversed.”

To me, “weight of the evidence” takes into account a variety of factors including sentiment, momentum, volume, trendlines, moving averages, reversal candles, exhaustion gaps, and many more concepts/indicators.

Right now, we’re seeing “price overextended” (a vague term) and high bullish sentiment. That’s not the weight of the evidence.

We’re NOT seeing divergences, trendline breakdowns, EMA breakdowns, etc. It would be much safer to short silver if we started to see some of those… but even then we DID see those in January 2011 that was nothing more than a weekly chart pullback ahead of the recent rally from $30 to $45.

One of technicians’ favorite saying is the well-known:

“A market can remain irrational longer than you (your account) can remain solvent” along with

“Trends tend to go higher (or lower) than almost anyone thinks they can go.”

So until we start seeing some material chart evidence of a reversal according to the “weight of the evidence” model, it’s probably a good idea to resist the urge to be a hero and call a top in this powerful metal until we see some objective sort of sign of reversal other than “it’s really expensive and overextended.”

Corey Rosenbloom, CMT
Afraid to

Follow Corey on Twitter:

Corey's new book The Complete Trading Course (Wiley Finance) is now available!

SDI Glossary: "Breakout" Definition
SDI Glossary: "Bullish" Definition
SDI Glossary: "price" Definition
SDI Glossary: "ETFs" Definition
SDI Glossary: "Finance" Definition
SDI Glossary: "TA" Definition
SDI Glossary: "Technical Analysis" Definition
SDI Glossary: "Trend" Definition
SDI Glossary: "Volume" Definition
This Article's Word Cloud:   Bernanke   ETFs   January   Silver   Weekly   another   bearish   call   chart   daily   divergences   evidence   from   gain   going   inverse   leveraged   main   momentum   more   ounce   overextended   point   potential   price   pullback   rally   reversal   rising   seeing   share   short   signal   silver   some   story   term   than   that   there   this   trading   trend   volume   weekly   weight   which   will   with   would

| More

Breaking Down and Away from the Highs in Electronic Arts EA
Wed, Jul 23, 3:21 PM ET, by Corey Rosenbloom

Electronic Arts (EA) surprised to the upside yesterday on earnings but failed to impress traders ...

July 23 Breakout Impulse Update and Stock Scan
Wed, Jul 23, 2:31 PM ET, by Corey Rosenbloom

Once again we ask the question, “How high can this market go?” Today saw a ...

Try Out Seven Days of Professional Market Analysis This Week
Tue, Jul 22, 5:41 PM ET, by Corey Rosenbloom

If you’ve ever wanted to know what’s behind the pay-wall (membership site) of Elliott Wave ...

July 22 Midday Trend Day Update and Trending Stock Scan
Tue, Jul 22, 1:31 PM ET, by Corey Rosenbloom

How high can this market bounce? Let’s take a look at our new S&P 500 ...

Join Corey Each Tuesday for a Live Morning Market Briefing with TradeStation
Mon, Jul 21, 7:11 PM ET, by Corey Rosenbloom

Start your Tuesday fresh with live market commentary, updates, and analysis from Corey as he ...

July 21 Bounce and Fibonacci Update with Stock Scan
Mon, Jul 21, 1:11 PM ET, by Corey Rosenbloom

With the morning sell-off and current bounce off a key Fibonacci Level, what price targets ...

Focusing on Just the Rallies - an Interesting Pattern Emerges
Fri, Jul 18, 2:40 PM ET, by Corey Rosenbloom

What does price reveal if we focus on “just” the recent rallies? A stealth bullish ...

July 17 Midday Intraday Update and Daily Stock Scan
Thu, Jul 17, 2:43 PM ET, by Corey Rosenbloom

With the geopolitical news affecting markets, traders seem to be adopting a “Sell First, Ask ...

July 16 Stock Scan and Intraday Trading Update
Wed, Jul 16, 2:53 PM ET, by Corey Rosenbloom

The bull trend continues higher today but what levels are important and which stocks are ...

Learn the Five Steps to Spot and Trade Rounded Reversals in a Live Webinar Wednesday
Mon, Jul 14, 5:30 PM ET, by Corey Rosenbloom

Have you ever been stumped by elusive market reversals? Would you like to learn the ...

July 14 Level Watching and Trending Stock Scan Update
Mon, Jul 14, 3:13 PM ET, by Corey Rosenbloom

What should we be watching in today’s market breakout? Let’s start with our “Sector Breadth” ...

Planning a Breakout and Watching Key Levels in Amazon AMZN
Fri, Jul 11, 12:28 PM ET, by Corey Rosenbloom is showing signs of life this morning with a range breakout into a key ...

July 10 Bear Trap Intraday Update and Stock Scan
Thu, Jul 10, 2:38 PM ET, by Corey Rosenbloom

With price breaking under the rising parallel trendline channel, the expectation was for a logical ...

Join Corey for a Webinar Thursday July 10 on Trading Short Squeeze Breakouts
Wed, Jul 9, 12:47 PM ET, by Corey Rosenbloom

I’m excited to present a featured webinar with Trader Kingdom this Thursday, July 10th at ...

Plotting the New SP500 Price Structure Pathway off Support
Wed, Jul 9, 11:28 AM ET, by Corey Rosenbloom

I wanted to update the simple “Color Price Structure” chart I’ve been showing all week ...

July 8 Sell Swing Intraday Update and Stock Scan
Tue, Jul 8, 2:38 PM ET, by Corey Rosenbloom

Today continued the expected sell-swing already in motion and price achieved its downside target (see ...

Updating SP500 Structure as Expected and Planning the Next Swing Again
Tue, Jul 8, 12:24 PM ET, by Corey Rosenbloom

If you followed yesterday’s morning update, then you’ll find today’s market action is exactly what ...

July 7 Intraday Update Level Planning and Stock Scan
Mon, Jul 7, 3:02 PM ET, by Corey Rosenbloom

What levels are we watching at the moment and which stocks are setting up as ...

Trading Opportunities from July Consecutive Up Closes Stock Scan
Thu, Jul 3, 2:56 PM ET, by Corey Rosenbloom

During the recent non-stop bullish price rally, which stocks have closed the most days in ...

Quick Charting the 12 Strong Trending Dow Stocks at 52 Week Highs
Wed, Jul 2, 4:43 PM ET, by Corey Rosenbloom

Of the 30 stocks in the Dow Jones Industrial Index, which 12 stand “head and ...

The Key Support Level Bonds TLT Must Hold to Prevent a Bearish Reversal
Wed, Jul 2, 2:29 PM ET, by Corey Rosenbloom

What support level must bond fund TLT hold or else trigger a breakdown/reversal event? Let’s ...

Netflix NFLX and the July Breakout through Resistance
Tue, Jul 1, 6:11 PM ET, by Corey Rosenbloom

Like the rest of the market, Netflix shares (NFLX) continued their uptrend with a shattering ...

Updating the Breakout into Open Air for 3D Systems DDD
Mon, Jun 30, 2:46 PM ET, by Corey Rosenbloom

Last week I highlighted a “Tracking a Reversal and Breakout Opportunity for 3D Systems DDD” ...

Charting Another Breakout in Volatile MannKind MNKD
Mon, Jun 30, 1:28 PM ET, by Corey Rosenbloom

Volatile stock MannKind (MNKD) crossed traders’ scans this morning with a breakout opportunity. Let’s take ...

June 26 Bear Flag Stock Market Update and Scan
Thu, Jun 26, 2:43 PM ET, by Corey Rosenbloom

Today’s session resulted in another sharp sell-off and “flag” style retracement for the S&P 500. ...

June 25 GDP Surprise Market Update and Stock Scan
Wed, Jun 25, 2:39 PM ET, by Corey Rosenbloom

The S&P 500 is retracing the losses from yesterday’s Morning Bull Trap and afternoon collapse ...

June 24 Rounded Reversal Intraday Trading Update
Tue, Jun 24, 2:43 PM ET, by Corey Rosenbloom

Well that was exciting! The S&P 500 initially triggered the alternate breakout (above 1,964) thesis ...

Tracking a Reversal and Breakout Buy Signal Trade in DDD
Mon, Jun 23, 7:13 PM ET, by Corey Rosenbloom

A potential breakout buy (and short-term trend reversal) signal is developing in 3D Printing Stock ...

June 23 Intraday Trading Update and Stock Scan
Mon, Jun 23, 2:33 PM ET, by Corey Rosenbloom

After yesterday’s Fed Day surprise breakout, the market is taking a break and consolidating after ...

Friday June 20 Market Update and Stock Scan
Fri, Jun 20, 2:48 PM ET, by Corey Rosenbloom

After a continuation of the Fed-Day rally, stocks paused today in a consolidation range. Let’s ...

Trade and Price Pathway Planning for Amazon AMZN
Thu, Jun 19, 3:48 PM ET, by Corey Rosenbloom

With the recent announcement of Amazon’s new phone, shares initially surged but then retraced all ...

June 19 Intraday Trading and Stock Scan Update
Thu, Jun 19, 1:46 PM ET, by Corey Rosenbloom

After yesterday’s Fed Day surprise breakout, the market is taking a break and consolidating after ...

June 17 Intraday Trading Stock Scan and Market Update
Tue, Jun 17, 2:44 PM ET, by Corey Rosenbloom

While yesterday’s session developed a clear Range Day, today’s session is balancing on the edge ...

LULU Reveals a Valuable Lesson on Enormous Distribution Top Patterns
Tue, Jun 17, 12:28 PM ET, by Corey Rosenbloom

Traders are often drawn to reversal patterns, and Lululemon (LULU) gives us a textbook lesson ...

June 16 Range and Stock Scan Intraday Trading Update
Mon, Jun 16, 2:43 PM ET, by Corey Rosenbloom

We’re seeing another Range Day develop so far in the market. Let’s update our intraday ...

Daily and Weekly Updating Apple AAPL Retracement for June 16
Mon, Jun 16, 12:28 PM ET, by Corey Rosenbloom

Apple shares (AAPL) continued their breakout and bull trend impulse after the late-April gap breakout ...

June 12 Sell Swing Continues Midday Stock Scan and Update
Thu, Jun 12, 2:38 PM ET, by Corey Rosenbloom

Although it should be happening, it’s still surprising to see the market actually decline after ...

June 11 Breakdown Sell Day Stock Scan and Update
Wed, Jun 11, 2:43 PM ET, by Corey Rosenbloom

We’re finally seeing some downside action! I was beginning to think that the market could ...

How Overextended is the SP500 Right Now in June?
Tue, Jun 10, 4:54 PM ET, by Corey Rosenbloom

I wanted to take a quick look at the current strong rally and objectively compare ...

June 10 Range Trading Stock Scan and Intraday Update
Tue, Jun 10, 2:39 PM ET, by Corey Rosenbloom

Today’s session gave us something a little different than the usual “straight up” price action ...

June 9 Intraday Reversal Stock Scan and Trading Update
Mon, Jun 9, 2:41 PM ET, by Corey Rosenbloom

While the breakout “short-squeeze” impulse market initially continued this morning through new highs, we saw ...

June 6 Similar Stimulus Short Squeeze Breakout Stock Scan
Fri, Jun 6, 2:11 PM ET, by Corey Rosenbloom

The breakout and impulsive bullish price action – continuing the large short-squeeze – extended into ...

June Divergence and Reversal Lessons from Commodities Corn Wheat and Coffee
Thu, Jun 5, 6:11 PM ET, by Corey Rosenbloom

Recent swings and reversals in commodity markets give us an example to study lengthy divergences ...

Putting Things into Perspective with Monthly Market Charting
Thu, Jun 5, 1:51 PM ET, by Corey Rosenbloom

Intraday traders often get caught off-guard by surprise movement that defies the logic of their ...

June 5 Stimulus Short Squeeze Breakout and Stock Scan
Thu, Jun 5, 1:21 PM ET, by Corey Rosenbloom

Sellers can’t seem to stop this freight train of a bullish market in breakout mode. ...

Under Armour UA Breakouts and Reversals into June
Wed, Jun 4, 6:11 PM ET, by Corey Rosenbloom

Under Armor topped our stock scanning list this morning, and I wanted to expand on ...

June 4 Additional Breakout Update and Stock Scan
Wed, Jun 4, 2:11 PM ET, by Corey Rosenbloom

Buyers did it again with a clean, impulsive, short-squeeze fueled breakout to all-time highs in ...

June 3 Reversal Retracement Stock Scan and Midday Update
Tue, Jun 3, 2:11 PM ET, by Corey Rosenbloom

Wow – price actually can trade lower! For a while that is. Let’s take a ...

June 2 Similar Trend Day Trading Update and Stock Scan
Mon, Jun 2, 2:11 PM ET, by Corey Rosenbloom

What levels are key in today’s session and which stocks are trend day trading candidates? ...

May 30 Weak Trending Intraday and Stock Scan Update
Fri, May 30, 2:21 PM ET, by Corey Rosenbloom

What has the market done, what levels are our current focal points, and which stocks ...

  More articles:  1 2 3 4 5 6 7 next »


Look at these ETF Charts SLV ZSL Before Calling a Top in Silver | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: -- a subscription-based online social networking forum of over 1000 individual investors. | -- videos appearing on SDI are produced by Market News Video. | -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.