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Could Silver Miners See a Boost or More Downside?


Precious metal gains have been held by Optimism.

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

Traders remain optimistic that the Fed will raise the Fed funds rate on the back of stagnant inflation and a declining economic picture. It has been roughly five months since market participants have really been hopeful for that first, likely meaningless, rate hike that has yet to come. But, could options action depict potential upside for silver miners visa-vie silver price appreciation?

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.

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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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