Silver Chartbook - Silver, Focus On Resilience

Summary

• In spite of an eight months correction in the precious metals sector, silver has shown quite some resilience again and again. In fact, it has held up better than gold.
• Resilience is the capacity to recover quickly from difficulties - in other words, toughness.
• Sideways range entries with quick risk elimination are representative of resilience.
• It isn’t business as usual; these times require extra preparation for the long haul.
• And you, as the trader and/or investor, need to be in the best shape and resilient too.

Resilience is the capacity to recover quickly from difficulties. In other words, toughness. Looking back over the last year, the world has experienced just such toughness. Unfortunately, this isn’t over yet. Maybe it’s even just the beginning, and much more is to come? We believe preparation is the wise course of action, but it needs a plan.

Silver’s price faces just the same strain. Much influenced by various strings pulling. It is essential to stay focused on the prime fundamentals and the clear long-term case for the shiny metal. Numbers for demand are overwhelmingly positive, and the fact that news coverage is strong doesn’t justify the temporary price dip to be principle based.

It is not easy to be a contrarian, yet it is very rewarding. We firmly believe this to be another good opportunity to add to one’s physical holdings of Silver (XAGUSD:CUR).

Silver in US-Dollar, Weekly Chart, Last Week's Setup:

Silver in US-Dollar, weekly chart as of March 24th, 2021.

We posted this chart in last week’s Silver chartbook publication.

The weekly chart of Silver shows in white the last eight months sideways range. Within that range, we had three dominant zones. Trading at the bottom of range three (green box) suggests the highest likelihood of turning point to be at trading prices right at this moment or below (all the way down to US$22.50). Watching Gold, the sector leader for relative strength or weakness towards Silver, to pick out the highest likely turning spot and the low-risk entry point is the goal over the upcoming weeks. In short, while prices trade within the yellow circle price range, US$22.50 to US$25.05 we are looking for low-risk entry points.

Silver in US-Dollar, Weekly Chart, Execution on the Plan:

Silver in US-Dollar, weekly chart as of April 1st, 2021.

Since prices moved into our pre-planned entry zone of the yellow circle, we posted two entries live on our free Telegram channel. We were able to take already partial profits based on our Quad exit strategy to eliminate risk and are now holding two runners.

Daily Chart, Silver in US-Dollar, 1st Trade - Stepping up to the Plate:

Silver in US-Dollar, daily chart as of April 6th, 2021.

On March 31st, 2021, the first low-risk opportunity while within the range of the yellow circle of the weekly chart presented itself. After a nine-day price decline in Silver, march 30th was the final strong, wide range trend down day, indicating a final washout. When prices bounced the following session, we stepped in at US$23.78. We quickly took partial profits based on our Quad exit strategy at US$23.87 and US$23.95 to find ourselves in a no-risk position with the stop for the remainder 25% position size to be at break-even entry levels. We generally have a 0.5% risk on each entry we take on Silver.

We took advantage of multiple odds stacked in our favor.

1. An action-reaction principle was supporting a bounce and, as such, nourishing a high likelihood to be able to reach our first targets to mitigate risk.
2. Divergences in two indicators, the CCI turbo and the fast Stochastic, marked in yellow.
3. A high-volume node of transactions provides support at the $ 24 price level (see green horizontal line based on histogram plotted to the right of the chart.

These factors presenting themselves within our larger weekly timeframe preplanned price range caused us to act aggressively.

Silver in US-Dollar, 60 Minute Chart, 2nd Trade - Reload:

Silver in US-Dollar, 60 minute chart as of April 6th, 2021.

The following day, April 1st 2021, another opportunity ripened for the taking. Again fractal volume node support was pointing for direction (see histogram to the right of the 60 min chart above). The end of the first quarter the previous day was bouncing strongly, indicating a possible trend reversal. We were looking to "reload" our position to build position size. We were a tad early in our entry at US$24.28, but after a brief sideways zone, we could take partial profits at US$24.71 and US$24.84 to find ourselves in a no-risk position. We are now holding two runners (the least 25% of each position).

In addition to Volume fractal node support, we found the 20 simple moving averages (yellow) and 40 simple moving averages (turquoise), turning upward to indicate that the trend direction was about to change.

We also timed both of these entries watching gold, the index leader for building similar entries at the same time.

Sideways range entries like these with quick risk elimination are representative of resilience. One doesn’t know which one of these entries will be the one where the remainder position size will break through the upper boundary of the range. One doesn’t need to. As long as the entries are low risk, this engagement in a tough sideways zone with the clarity of great success once the range breaks in the direction of the trend supports persistent efforts.

Monthly Chart, Silver in US-Dollar, Silver-Focus on Resilience, The Edge on our Side:

Silver in US-Dollar, monthly chart as of April 1st, 2021.

It is a misconception that one needs to be right to make money. But the ego constantly suggests us to find that best entry price. However, there is no such thing. We need to try resiliently until we get it right and control risk and reward ratios over sample sizes. An effort that requires a resilient mindset.

A look at the most critical large time frame chart above shows three crucial factors.

1. A preceding strong directional leg from US$12 to US$30 indicating a trend.
2. A very favorable risk-reward ratio for the large time frame players.
3. And if you have a closer look within the red box, you will find excellent volume transaction support below the price we are trading right now.

Trading is a business no matter what time frame. You are in charge of wealth preservation and creation and you are the core anchor. Hence, you need to be in the best shape. Review your business plan and be aware that resilience requires a review of your breaking points. While we typically streamline business for efficiency, resilience points towards risk control and a look at dependencies. Ask yourself what can be learned from last year’s challenges and what can be done that similar surprise events do not negatively impact your business.

Silver, Focus on Resilience

Why did we pick this topic? Because trading and investment systems are only as good as their weakest link. With human error in trading being the number one equity curve killer, you are the weakest link. With change gaining speed, we find a top-down approach necessary to assure resilience to act upon the opportunities that change offers, maturely and fittingly. It isn’t business as usual; these times require extra preparation for the long haul.

Analyst’s Disclosure: I am/we are long XAGUSD:CUR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Catman69]

Thank you.

[Catman69]

Paper floats. Plastic waists oil .steel sinks .

[Catman69]

When you mine the earth. It Crumbles. Coming much faster .
Whirlpooling.

[Miners to the Moon]

Good piece, Florian - silver miners very strong today:

HL + 5.5%
SILJ 4.5%
PAAS 4.4%
SLVP 4.1%

Sold small trading positions in SILJ & PAAS.