The iShares Silver ETF (SLV) continued its strong surge this week, hitting an all-time high as the silver price rose to a record ahead of the upcoming Federal Reserve interest rate decision and as the odds of a US government shutdown rose. SLV ETF jumped to a high of $106, up by 250% in the last 12 months. Still, there is a risk that the fund and silver prices will pull back in the near term.
Why the Silver Price is in a Bull Run
Silver price continued its remarkable bull run, mirroring gold’s jump to a record high of over $5,000 amid geopolitical jitters. For example, Donald Trump has sent an armada into the Middle East, and there is a possibility that he will attack Iran soon. In an interview with Axios, he said that he was still undecided, but was actively considering how to respond to the recent Iranian protests.
Iran, on the other hand, has warned that any attack will trigger a major retaliation that will affect the energy market this year. The odds of an attack this year have continued to rise.
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Gold and silver prices jumped as investors reacted to the rising odds of another prolonged government shutdown in the US on Monday. Democrats have threatened to shut it down because of the ongoing brutality by ICE and the Department of Homeland Security. It will be the second government shutdown in a few months.
Still, there is a risk that silver and the SLV ETF will reverse in the coming weeks or months. First, data shows that smart money investors have started to rotate out of the SLV ETF despite the ongoing rally. The fund has experienced an outflow of over $952 million this year. In most cases, you would expect the fund to have inflows as the price surges.
SLV ETF Stock Price Technical Analysis
The daily timeframe chart explains why the SLV ETF stock may be on the verge of a strong bearish breakdown in the near term. It has formed a shooting star candlestick, characterized by a long upper shadow and a small body. This is one of the most common bearish reversal chart patterns in technical analysis.
The ETF remains well above its 50-day and 100-day Exponential Moving Averages (EMAs), suggesting it may revert to the mean in the near term. Also, the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have moved to extreme levels, meaning that a reversal could be on the way. If this happens, the next key support level to watch is $90.
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