Silver ETF a Good Buy at These Levels?
Source: ETF Daily News, Thomas Carreno (3/31/11)
"The SLV has already made a huge move since early February 2011. That was the 'easy buy.'"
Now the SLV is in a more mature, advance stage and I think if one is going to go long from here, it should be a shorter-term, swing trade long position with a tightly controlled stop.
Why? Because even though momentum still looks quite strong, the chances for more technical selling are stronger. So if one gets too complacent, there is the risk of getting caught in a big profit-taking wave.
So, I would say that if I were to go long the SLV from here I would try to do it from 37 or slightly under and then set a protective stop loss at 35.70. That would put the stop loss right under the recent breakout area. Assuming an entry at 37, and then assuming the stop loss gets hit the same day or next the day, it would equate to a loss of 3.51%.
There is a chance SLV could see 40–42 range. That would equate to a gain of either 8.10% or 13.51%, respectively. I see 40–42 range as heavy resistance based on the broadening wedge structure.
So a possible 3.51% loss versus a possible 8%–13% gain? It seems to be a favorable risk reward. But since the SLV is now so mature in its advance, it is by no means a blockbuster risk reward. It's 'ok,' but there are probably much better opportunities out there right now.