Trade of the Day: Silver Miner ETF SLVP Set to Soar?

iShares MSCI Global Silver Miners ETF (SLVP) — Shares of SLVP have more than doubled since their Jan. 20 low as precious metals prices rebounded following a multiyear bear market. This has led to speculation about whether silver and related equities have bottomed.

One reason to believe they will continue to rally is the price ratio of gold to silver. It currently sits at more than 75-to-1. This is well above the historical average for the past 40 years of about 50-to-1, and similar spikes in the ratio have often led to buying demand in silver.

SLVP is a speculative investment with many holdings in international miners that are not traded on U.S. exchanges. The ETF’s top 10 holdings are Silver Wheaton Corp. (USA) (SLW), Fresnillo Plc, Compania de Minas Buenaventura SAA (ADR) (BVN), First Majestic Silver Corp (AG), Industrias Penoles SAB de CV, Tahoe Resources Inc (TAHO), Pan American Silver Corp. (USA) (PAAS), Hecla Mining Company (HL), Coeur Mining Inc (CDE) and MAG Silver Corp.

The ETF began trading in early 2012 near $25 and quickly ran to its all-time high of $27.06 before succumbing to the bear market in commodities. A line drawn from that high connects with several points not shown on the chart below, but terminates at about $14.

The chart does show a break through an intermediate trendline at about $5.75, as well as a break through a resistance line under $9 drawn from the consolidation in June/July.

SLVP is now in an intermediate uptrend with support at $8.60 and resistance at $14. Try to buy shares under $9 with a trading target of $14 for a potential return of more than 55%. Long-term investors may want to hold SLVP for an even bigger gain if the price ratio of gold to silver moves closer to its historical average.

SLVP Chart
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Chart Key

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