Don't Ignore This Chart!

Silver Surges out of Bollinger Band Squeeze


Industrial metals surged on Wednesday with 2+ percent gains coming in silver, aluminum, palladium, copper and nickel. The Silver ETF (SLV), in particular, finally broke out of a two-month consolidation.

The chart below shows the Silver ETF (SLV) with Bollinger Bands in pink and BandWidth in the indicator window. Overall, SLV has been stuck in a large trading range the last 12 months. With today's move, the ETF surged off the mid-point of this range and the cup is now half full. 

The Bollinger Bands narrowed in early March and remained tight into April. Notice that BandWidth dipped below 4% in early March and just now moved above 4%. The narrowing reflects a volatility contraction and such contractions are expected to be followed by a volatility expansion, which is happening now as the bands start to widen again.  

The breakout is clearly bullish and the breakout zone in the 15.8-16 becomes first support to watch should we get a throwback. Measuring upside targets is tricky business, but a measured move would targets a move to the 17-17.2 area. The December-January advance was around 13% and a similar move could occur from the March low. 

Plan Your Trade and Trade Your Plan.

- Arthur Hill, CMT

Senior Technical Analyst,

Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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