iShares Silver Trust ETF (SLV) — Like SPDR Gold Trust ETF (GLD), which I recommended as the Trade of the Day on Jan. 9, SLV holds the physical metal and is therefore a pure play on silver. The fund is not managed, so its price is determined by the daily price of silver bullion in the open market minus expenses and liabilities. Because it is a commodity exchange-traded fund (ETF), SLV may be subject to unique risk factors such as variable interest rates and currency fluctuations.
SLV has low expenses of 0.5% and trades at a slight premium of just 0.32% over its net asset value (NAV). Morningstar gives the fund a four-star rating.
SLV has been in a bear market since April 2011, when it topped at $48.35. However, since November 2014, when it broke its bearish resistance line, SLV began forming a “W,” which is a strong bottom formation.
On Tuesday, shares rallied 2.7%, breaking from the “W” on high volume and a breakaway gap. When this occurs following an extended bottoming process, gaps that are created during a breakout are seldom filled.
The high volume was accompanied by a buy signal from the Moving Average Convergence/Divergence (MACD) indicator. Support is represented by the combination of the 20-day and 50-day moving averages at $15.50.
Buy SLV for an intermediate-term trade back up to its July high near $20.50, which is 24% above current prices. Investors may also want to purchase SLV as a long-term hold in the precious metals group.
