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This morning I am recommending a bullish trade on the iShares Silver Trust (NYSEARCA:SLV), an exchange-traded fund that tracks the performance of silver.
While the market has worked off some of its extremely oversold condition following Wednesday’s massive rally, my indicators are still giving bearish readings.
Just last week, I said, “Rallies during bear markets can be much steeper and stronger than you might expect, but they should not be trusted.”
We certainly saw just how steep and strong they can be on Wednesday, as the Dow Jones gained over 1,000 points in a single trading day.
Daily Chart of Dow Jones Industrial Average — Chart Source: TradingView
However, we are in a period of time where a lot of professional investors are still on vacation and volume is very low. Therefore, there’s just not a lot of commitment behind this recent bullish move.
Despite this rebound, the fact that the market has dropped about 20% over the course of just a few months is not a good sign. It tells me that perhaps there is more concern among market participants than was previously believed.
The market is very intelligent… More intelligent than any individual trader. And if you look at the message the market is sending, it’s saying that something is wrong.
In my opinion, we may be entering a recession without even realizing it. We could be in a deeper trade war than anyone expected. And, of course, the way the international markets have acted over the past year has not been good either.
But as the markets have fallen, investors have started to turn to precious metals like gold and silver to protect their portfolios.
As you can see in the daily chart of SLV below, it recently broke out above resistance at the $14 level.
Daily Chart of iShares Silver Trust (SLV) — Chart Source: TradingView
It now looks like it wants to challenge its longer-term 200-day moving average at $14.50. And if it can break that level, it could continue higher to the next resistance range between $14.80-$15.
If that occurs, the SLV calls I’m recommending today should turn a great profit.
Buy to open the iShares Silver Trust (SLV) Mar 15th (2019) $14 Calls (SLV190315C00014000) at $0.75 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
