For a long time, precious metals like gold and palladium have overshowed silver.
From March 2016 to March of this year, palladium went on a 245% run. Gold rose roughly 44%. Silver, on the other hand, went up only 5%.
However, as traders, we’d be foolish to ignore silver today. The charts tell us now is the time to act. Let me explain…
A “Textbook” Head & Shoulders Pattern
Take a look at the chart below…
If you’ve been with us since the beginning, you may recognize one of my favourite chart patterns: the Head & Shoulders.
You can see the two shoulders above, formed by the peaks and valleys the price makes on the chart. There’s also the neckline – a trendline connecting the left shoulder to the right shoulder.
Using the pattern is simple: Once the price forms the right shoulder and then breaks through the neckline, you can typically expect a sharp selloff.
I drew out the pattern on the chart above. It looks quite textbook. And right now, we’re close to the pattern completing. If it does, silver could have a powerful move to the downside.
I would expect such a move to re-test the recent lows of around $12 per ounce set on March 18. It could even drag the price of silver into single-digit territory.
As long as the right shoulder does not put in a new high above the top of the head (at 15.8), this chart pattern is still in play.
One way to take advantage of a move lower in silver is by buying the VelocityShares 3x Inverse Silver ETN (DSLV). It’s a leveraged exchange-traded note that tracks the inverse price of silver.
Keep in mind it does come with some added risk. If the price of silver goes up 1%, DSLV will go down 3% (plus fees). However, if the price of silver goes down 1%, DSLV will move up 3% (minus fees).
Editor, Money Trends