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Deron Wagner is the founder and portfolio manager of Morpheus Trading Group. His daily focus is managing and trading the Morpheus Capital Hedge Fund, which he founded in April of 2004. He also teaches his swing trading strategy with The Wagner Daily newsletter, which provides exact entry, exit,... More
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Morpheus Trading Group
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Morpheus Trading Group - swing trading blog
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Advanced Technical Analysis of ETFs
  • Bull Flag Breakout – Silver ETF Poised For Further Gains ($SLV) 0 comments
    Aug 26, 2013 11:09 AM | about stocks: SLV, AGQ, GLD, DGP

    One week ago, in this blog post, we pointed out the bullish trend reversal pattern of iShares Silver Trust ($SLV) and said we were stalking the ETF for potential buy entry.

    Specifically, we said, "$SLV has convincingly broken out above resistance of a downtrend line (dotted black line) that had been in place throughout all of 2013. That breakout above the downtrend line also coincided with a sharp move back above its 10-week moving average (roughly equivalent to the 50-day moving average on the daily chart). Furthermore, last week's rally in $SLV was confirmed by a sharp increase in volume. This, of course, indicates institutional money flow into the ETF."

    To refresh your mind, here's the weekly chart pattern we showed at the time of our original analysis:

    (click to enlarge)

    As for our buy entry strategy, we said "Ideally, we would like to see $SLV retrace back down to near the prior downtrend line (which has now become the new support level). However, even if $SLV does not pull back that much, we will be looking for either the formation of a bull flag type pattern on its daily chart, OR a pullback that forms a bullish reversal candle (at which time we would look to buy above that day's high in the following session)."

    Of the above scenarios, $SLV went on to form a bull flag pattern that led to a sharp rally and resumption of the bullish momentum on August 23. On the annotated chart of $SLV below, notice that the ETF surged 4% higher last Friday (August 23):

    (click to enlarge)

    When analyzing a bull flag chart pattern, the width of the flag (the price consolidation) part of the pattern should be approximately equal to number of days it took for the flagpole (vertical part of the pattern) to form. In this case, the bull flag pattern was nicely formed because the width of the pattern was five days (before last Friday's rally), while the height of the pattern was six days.

    As mentioned in our original analysis, silver ($SLV) continues to outperform and show relative strength to gold ($GLD) as well. Below, the percentage change chart compares the gains of $SLV vs. $GLD since both ETFs bottomed out at the end of June:

    (click to enlarge)

    In our swing trading newsletter, we are already long silver from our August 21 buy entry into the leveraged ProShares Ultra Silver ($AGQ). Since the ETF is designed to move at double the percentage change of the spot silver commodity, $AGQ zoomed 8% higher last Friday and should continue significantly higher in the near-term. As always, we will alert paid subscribers in advance of taking profits on this momentum trade.

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    DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

    © 2002-2013 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

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