Silver: Value Buy
By Raghu Gullapalli, contributing writer , as originally published on Minyanville
Value investors, such as Warren Buffet, William O’Neil and Jordan Kimmel are all big proponents of the idea of buying low and selling high. All these extremely experienced investors also look at historical patterns and are always on the hunt for bargains.
Or as traders refer to it, “buying into a pullback.”
Since its ballistic drive up in late April to create new historic highs, silver has plummeted down and the market saw the kind of volatility many traders thought gone in the post financial crisis era. But rather than continue its freefall to price levels that this writer thought were more in keeping with its historic norms, silver defied expectations and has consolidated in a $5 range over the past seven weeks.
Some peers of mine who are absolutely first rate technicians believe silver is maturing into a Bear Flag and may indeed seek out historically normal price levels in keeping with the 1:60 ratio of Gold and Silver. Time may prove their premise correct.
As a trader who keeps his eyes on the price action of the players in a sector, I am of the belief that this range has allowed a few savvy investors to accumulate Silver at price point they are comfortable at. If you look at the charts of the silver exchange traded fund, iShares Silver Trust (SLV) you will see that it has held above the 210 period moving averages.
With the uncertainty in the markets over the future of Greece and the effect events there may have on other similarly indebted Nations, do not be surprised if investors in Europe rally to precious metals before people in U.S markets do.
Another check in the favor of the bullish scenario is that from a historical perspective Gold and Silver prices rise in the latter half of the year. This price jump is spurned on by demand from India as my kin buy mountains of the metals to celebrate religious festivals and the peak of the marriage season.
SLV will languish down here only a while longer and may then seek out the $40 price point. Do not be too surprised if Silver is back at the highs by years end. Smartstops has the reentry price for SLV at $37.72 and the short term and long term stops at $32.33 and $31.42