Could Silver Miners See a Boost or More Downside?

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Bullion.Directory precious metals analysis 14 April, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Senior FX and Commodities Analyst at FX Analytics

Last week, Mike Yamamoto of OptionMoster pointed out that a single trader has a bullish bet on silver prices. The site’s proprietary “Heat Seeker” system signaled that 6,372 July $17.50 call options were purchased on the iShares Silver Trust (SLV)- the trader would only make money is silver closes on the day of expiration above $17.50 per ounce. Expiration will be July 17, when the FOMC is expected to begin their monetary tightening.

Silver miners could benefit if silver prices rise? Very likely. The Global X Silver Miners ETF (SIL) has been beaten up of late, but price action is setting up for a big move in either direction. Price action is testing the descending resistance within a symmetrical triangle. If prices can close above this level, SIL could trade higher to $9 and $9.26 from $8.62.

This could represent a 4.5 and 7.5 percent gain, respectively. On the higher end, if silver prices do rally longer-term, SIL could test the larger downtrend resistance at $9.60. Conversely, resistance could hold and support is found at $8.31 and $7.77 before SIL begins to challenge descending support.

The ADX is below 20 with the – DMI declining, which could prove beneficial for short-term movement. However, the ADX is signalling that there is currently weak price momentum.

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