XAGUSD - Long-term break-out confirmed!
Atualizado
Hi there - I though I'd share my ideas around Silver which is my favorite pick amongs precious metals.
FUNDAMENTALS
Silver is largely included in protective ETFs that would see inflows from the heaven aspect of precious metals and there protective aspect vs inflation. In an end of cycle of Equities, falling corporate profits, little room for bonds to run and one can argue that inflation is probably coming back sooner rather than latter (not going to develop on this subject which is an analysis of its own).
On the physical side, if you think the solar panel revolution is here - Bloomberg new energy projection see a real penetration of the technology closer to 2025, in sync with the affordability of batteries. By then everyone will have solar panels on their roofs as affordability increases - expect demand to increase 10-100x depoending on the region and local government support - supporting long-term physical demand for XAG.
TECHNICALS
Looking back at the long-term down trend in place since 2011, a lot of indicators are pointing to a reversal, with a change in trend in Jul-Aug 2019:
The strongest signal being the double bottom completion of December 2015 follow by a slightly higher bottom in October 2018.
For now the theory stands on the medium term, as we continue looking for confirmation from important indicators:
-1st medium-term top in September 2019 - in what looks like the completion of the first wave under the Elliott wave theory.
-2nd wave completed in the consolidation from Sept to early December 2019
-Validated by a strong falling wedge formation on the exact wave 2 discussed above, with break-out around Dec 20th.
On long-term analysis like this one I like to look at Weekly candle sticks first and find entry and exit point on the daily charts, and fixing limits orders on the 30min Candle.
Such that on the Weekly chart the RSI is clearly bouncing off the 50 level after break-out in July - expect to see it north of 50 for most of the coming year/years - BULLISH
The 12 weeks average is crossing the 24 weeks - marking an important BULLISH signal on the MACD
OTHER THOUGHTS
- Another very interesting analysis is around its correlation with the broader market - with a general negative correlation with the SP500 from 2011 to 2018. And a change in trend early 2019 - this is most probably due to support brought by the safe heaven caracteristics and the miss-trust in current market and geo-political uncertainties since Donald Trump.
-Looking at prices of Gold (XAU) which are making new highs. Its interesting to look at the historical multiple/ratio at which silver trades vs gold: close to highest in history (with a high of 93 in july19, slightly above the top reached in 2008 before it dropped back to 30 in 2011). Such that you would expect the ratio to reverse to the mean - this is a strong support for new highs ahead for Silver.
Thats way to much positives - there must be someone that has arguments against and is a seller in this market, so lets try to find them, and this post is actually created so that you bombard me with counter arguments to the above! Its important to look at the other forces that can negatively impact precious metals prices:
- Unprecedent liquidity making equities attractive in search of yield (because bonds a trading extremly low investors are desperate for risk) - the argument against this, is the limit of risk aversion after a good run. Some sort of selffulfilling cycle where investors diversify in inflation protective assets such as precious metals while others chase the moon, become gready and make mistakes. If inflation comes back: bonds dive, if bonds dive companies strugle to repay their debt, leading to a panic in equities. We are closer to this scenario on an end of cycle after a 12 years and longest bull market in history.
-Large physical supply and accessible - though I am not an expert in mining.
-Because markets are emotional - valuations can continue to stretch for a while until the liquidity tap is closed. Thats why we put a stop loss order.
-Any advise to buy or sell a stock must be incorporated into a portfolio strategy and keep that in mind - the above or below is not to be blindly followed!!
HOW TO PLAY IT
I would go for the cheap option and numbers below are to be adjusted as we get clearer charts definition:
A liquid Physical ETF. "SLV" traded in USD is a good one
Build a position today at 18.1 XAGUSD (or SLV @ 16.9) (70% of long-term target total value - i.e. 700 contracts if you target 1000)
Be ready to follow on at 17.2 for the 30% remaining
STOP LOSS FOR ALL POSITION @ 16.5 - (Indeed this would contradict all our above theory)
I would expect a strong resistance a 20.5 - where we should mark a double top of 2016 => take 70% profits on your position @ 19.5-20.5 (to be defined by shorter term technical analysis as we get closer to this points) and wait to retest the lower part of the chanel before re-entering - I will follow-up when we reach this point but a Cup-handle formation to be expected with some profits taking at this level limiting any additional upside. Before we make the major break-out towards 40-50.
I hope you enjoyed the reading! And please dont hesitate to coment!
FUNDAMENTALS
Silver is largely included in protective ETFs that would see inflows from the heaven aspect of precious metals and there protective aspect vs inflation. In an end of cycle of Equities, falling corporate profits, little room for bonds to run and one can argue that inflation is probably coming back sooner rather than latter (not going to develop on this subject which is an analysis of its own).
On the physical side, if you think the solar panel revolution is here - Bloomberg new energy projection see a real penetration of the technology closer to 2025, in sync with the affordability of batteries. By then everyone will have solar panels on their roofs as affordability increases - expect demand to increase 10-100x depoending on the region and local government support - supporting long-term physical demand for XAG.
TECHNICALS
Looking back at the long-term down trend in place since 2011, a lot of indicators are pointing to a reversal, with a change in trend in Jul-Aug 2019:
The strongest signal being the double bottom completion of December 2015 follow by a slightly higher bottom in October 2018.
For now the theory stands on the medium term, as we continue looking for confirmation from important indicators:
-1st medium-term top in September 2019 - in what looks like the completion of the first wave under the Elliott wave theory.
-2nd wave completed in the consolidation from Sept to early December 2019
-Validated by a strong falling wedge formation on the exact wave 2 discussed above, with break-out around Dec 20th.
On long-term analysis like this one I like to look at Weekly candle sticks first and find entry and exit point on the daily charts, and fixing limits orders on the 30min Candle.
Such that on the Weekly chart the RSI is clearly bouncing off the 50 level after break-out in July - expect to see it north of 50 for most of the coming year/years - BULLISH
The 12 weeks average is crossing the 24 weeks - marking an important BULLISH signal on the MACD
OTHER THOUGHTS
- Another very interesting analysis is around its correlation with the broader market - with a general negative correlation with the SP500 from 2011 to 2018. And a change in trend early 2019 - this is most probably due to support brought by the safe heaven caracteristics and the miss-trust in current market and geo-political uncertainties since Donald Trump.
-Looking at prices of Gold (XAU) which are making new highs. Its interesting to look at the historical multiple/ratio at which silver trades vs gold: close to highest in history (with a high of 93 in july19, slightly above the top reached in 2008 before it dropped back to 30 in 2011). Such that you would expect the ratio to reverse to the mean - this is a strong support for new highs ahead for Silver.
Thats way to much positives - there must be someone that has arguments against and is a seller in this market, so lets try to find them, and this post is actually created so that you bombard me with counter arguments to the above! Its important to look at the other forces that can negatively impact precious metals prices:
- Unprecedent liquidity making equities attractive in search of yield (because bonds a trading extremly low investors are desperate for risk) - the argument against this, is the limit of risk aversion after a good run. Some sort of selffulfilling cycle where investors diversify in inflation protective assets such as precious metals while others chase the moon, become gready and make mistakes. If inflation comes back: bonds dive, if bonds dive companies strugle to repay their debt, leading to a panic in equities. We are closer to this scenario on an end of cycle after a 12 years and longest bull market in history.
-Large physical supply and accessible - though I am not an expert in mining.
-Because markets are emotional - valuations can continue to stretch for a while until the liquidity tap is closed. Thats why we put a stop loss order.
-Any advise to buy or sell a stock must be incorporated into a portfolio strategy and keep that in mind - the above or below is not to be blindly followed!!
HOW TO PLAY IT
I would go for the cheap option and numbers below are to be adjusted as we get clearer charts definition:
A liquid Physical ETF. "SLV" traded in USD is a good one
Build a position today at 18.1 XAGUSD (or SLV @ 16.9) (70% of long-term target total value - i.e. 700 contracts if you target 1000)
Be ready to follow on at 17.2 for the 30% remaining
STOP LOSS FOR ALL POSITION @ 16.5 - (Indeed this would contradict all our above theory)
I would expect a strong resistance a 20.5 - where we should mark a double top of 2016 => take 70% profits on your position @ 19.5-20.5 (to be defined by shorter term technical analysis as we get closer to this points) and wait to retest the lower part of the chanel before re-entering - I will follow-up when we reach this point but a Cup-handle formation to be expected with some profits taking at this level limiting any additional upside. Before we make the major break-out towards 40-50.
I hope you enjoyed the reading! And please dont hesitate to coment!
Trade ativo
Looking at the position - we are consolidating on the short term with a retreat since hinting overbought on the rsi (78). We will see if we bounce on the 50 mark the coming days, but risky cross on the macd signals more selling.If we are lucky we will see it bounce off the 17.15 mark - where we complete the position.
STOP LOSS MOVED to 16.9.
tradingview.com/chart/46At65UU/
Trade ativo
Consolidation seems over, and we should be starting the new leg up.MACD crossing and bounce around 50 on RSI is positive and in line with analysis.
Additionally, the USD has been very strong and is making new tops, dragging down on the short term the XAGUSD. As an example, EUR being on a nose bleed since december 31st 2019, XAUEUR or XAGEUR are making new highs. We should expect the same of XAUUSD and XAGUSD as the USD takes a break at this important resistance level of 99.5 on the DXY (could add pressure if it goes to new high on the current chanel at 100.6). EURUSD is completely oversold and will be hitting an all important support at 1.075 (assuming it does not continue its downward spiral to 1.05-1.03, previous low but would breach the long term upwardslopping support in place since 2009... Opening the door to longer period of weakness). Note that it could go down to 1.05 previous
All in all the move on the USD since end of December has made it difficult to make new highs on the XAGUSD but the underlying Silver is still on a strong bullish trend that should resume as the USD consolidates around this level.
Nota
EUR shot-up as predicted but XAG breaching very important level. Stopped out at 17.3. We will watch advancement closely to re-enter around 16...
Aviso legal
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