Squeezing Silver Tight

Hey There Income Hunters,

I had a blast during yesterday’s “Trading the Fed” presentation and want to thank everyone again for attending!

And welcome to everyone who is reading their first edition of Power Moves. We are so glad you’ve joined the #IncomeHunters.

If you couldn’t make it to the event, the replay is available here.

We’ll review the silver trade I shared in a bit, because it’s one I’m very excited about and it’s something we can track together over the next several months.

First, there’s something else you need to see. There are a few pockets of demand percolating and the newest one may be the most important …

The 14 silver ETFs in the chart below account for more than 85% of the silver held in the London Bullion Market Association (LBMA) vaults …

Competition for the remaining 3,000 tonnes or so that are left is INSANE …

But that’s just one part of the story …

Silver Bullets
Silver demand is also building in the electronic vehicle (EV) sector…

  • The US’s return to the Paris Agreement will add pressure as it relates to growth in battery electric vehicles (BEVs).

  • GM announced plans last month to phase out gas and diesel engines by 2035 and build an all-electric fleet. (What!?)

  • Fifteen countries have already announced timelines to ban new internal combustion engine (ICE) sales. 

  • Supporting infrastructure, such as roadside and domestic charging stations will also drive demand. Projections show by 2029, there will be 10 million public charges stations and 50 million private charging points globally.

Also, and this is key, silver is “real money,” which is powerful with inflation on the horizon.

As “real money” silver is a commodity used as a store of value, so when central banks print money, silver prices rise as the value of the dollar decreases.

And guess what? The Fed is about to print nearly $2 billion — and I predict much more in 2021.

Where Is Silver Going?
Let’s look back for a moment at the 2008 financial crisis for an idea on what to expect from silver via the iShares Silver Trust (Ticker: SLV). It was a time when the Fed was creating massive amounts of new currency …

Back in 2008, the recession caused a deflation scare and SLV went through a deep correction.

In October of that year, the SLV price/RSI divergence gave a nice buy signal. Two months later the Fed announced a quantitative easing (QE) stimulus and it was off to the races.

I see a similar scenario in SLV today!

The 2021 Covid-19 resurgence has created short-term uncertainty and SLV is correcting in a similar manner to the timing of 2008 …

The correction has removed the extreme long position indicator and we know more stimulus is on the way — so it’s a good time to jump in.

Let’s take a look at the short-term and long-term charts for perspective.

Here is the weekly chart, which says to me that next time we take out the high SLV, we will not look back …

In the daily chart below, we keep getting higher lows as the 50-day moving average is sloping higher …

We may drift down to 24, but no guarantee on that especially for a longer-term trade …

Where is silver going?
OK, below is a breakdown of trade that I shared yesterday.

It’s one I’m very excited about and it’s something we will track together as #IncomeHunters over the next several months.

SLV vertical Call Option Spread:

  • Buy the $25 strike and sell the $45 for $307 per contract

  • Max profit is the difference in strikes = $2,000 per contract

  • Max loss is the debit spread paid = $307 per contract

  • The reward vs risk on the trade is 6.5 to 1 in our favor

Here’s the trade risk profile …

The fundamentals and the technicals for SLV are looking great, and the call spread is an incredible vehicle for putting a 6.5-1 reward-risk ratio in your favor …

The Fed, Treasury and Blue Wave will take care of the rest!

Bring It Home
The #IncomeHunters community here at Power Moves will work this trade together over the next few months as there are real opportunities to make it a winner again and again. 

If you have any questions about the trade — or anything else — just reply to this email!

Stay tuned, folks!

Have a great weekend everyone, and as always …

Live and Trade with Passion my Friends,

Griff

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