Is Silver’s Next Rally Starting?

07/14/2011 8:00 am EST

Focus: COMMODITIES

After a move higher above the 50-day moving average, silver ETF SLV has found potential footing for a push higher—and possibly even a re-test of the all-time highs made in April.

Shares of iShares Silver Trust (SLV) has been trading in a tight sideways band since its steep, one-week selloff back in early May.

SLV has a rising trend support line with initial lows at $33.32 and most recent lows at $33.00. SLV also has a declining trend line resistance with rally highs at $37.60 and then the most recent rally high at $35.75.

This creates a pennant pattern for SLV, and a breakout yesterday above the 50-day moving average (MA). If that moving average now acts as support, we could be headed higher for a while, perhaps even up to the all-time high reached in late April.

chart
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Typically, pennant patterns break in the direction of the previous trend. In this case, that trend was to the upside.

Gold bullion is again nearing its highs and a potential breakout. SLV could follow to the upside, but we recognize that this is a risky trade and sell stops must be used.

Support is currently at $33.00.

By Frank Kollar of FibTimer.com

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