One of the interesting stocks to watch is iShares Silver Trust (ticker: SLV). SLV stock has risen nearly 20 percent this year alone, hitting a high on Feb. 28th, 2012. However, since attaining this peak, the price of this exchange traded fund (ETF) has slid back, and latest trading activity indicates a reduced interest in silver among the investors for now. The decline suggests that traders have booked profited because they anticipate more quantitative easing from the Federal Reserve. From the highs of May 2011, the SLV stock has gone down considerably and then rallied back again.
In this volatile market scenario, it is challenging to trade profitably in a stock such as SLV. However, from a trader’s viewpoint, substantial profit making potential exists in such stocks that show a major swing in prices. A number of analysts are reluctant to invest heavily in the equity markets at the moment, considering the uncertain global market scenario, European debt crisis, and rumors about China fudging its GDP figures. In such a situation, silver can be traded as a hedge, particularly when the trading environment is “Black Swan” like. Silver is not only an investible commodity, but it also has industrial usage, which makes it an attractive and safer investment option.
Trading Strategy for SLV Stock
If an investor has purchased the stock of SLV at a higher valuation in the previous year, the most common tendency may be to hold the stock and wait for the price of silver to rise in order to recover the cost or make a profit. However, the risk in this approach is that the prices of a commodity such as silver can be very volatile, and “hold” may not be the best strategy for SLV.
The better approach would be to keep purchasing the stock of SLV on price dips, and keep selling it off whenever the price rises. The profit earned through such nimble-footed trading activity can offset the losses incurred in the earlier purchase of the stock at higher valuations. Therefore, short-term trading is the best strategy to make money in a stock like SLV.
Buyers with holding capacity may also invest in SLV stock for the long-term. iShares Silver Trust is a respected company dealing in a precious metal that is never going to disappear. Due to trading activity and external market factors the stock price of SLV may drop suddenly at times, but no matter how long it takes, ultimately the price will recover. Since 2007, the prices of silver have continued to rise consistently. As a result, the stock price of SLV has also moved higher in similar proportion. The inherent value of SLV is strong because silver is a fundamentally strong commodity.
Price History of SLV
The stock price movement patterns of SLV over the last two years 2010 and 2011 indicate that this stock may continue to trade largely between $20 and $30 price range. The ideal purchases in this stock may be made between the price range of $20 to $25 in order to achieve more profitable trades.
From the past data about the movement of silver prices and the general growing interest in precious metals over other forms of investment, it appears quite clear that SLV stock cannot remain very low for a long time. It is bound to create new highs from time to time. Those are the “sell” opportunities when alert and agile traders will be able to book profits, and repurchase the stock when the prices decline again.