iShares Silver Trust
Another potential breakout trade could be setting up nicely for the iShares Silver Trust ETF (SLV). This is a grantor trust that is designed to provide a vehicle for investors to own interests in silver. The purpose of the trust is to own silver transferred to the trust in exchange for shares. This ETF is still up over 35% this year despite a massive drop a few months ago.
If you take a look at the chart for iShares Silver Trust, you'll see that this ETF has been making higher lows and higher highs since it hit a near-term bottom in June at $32.50 a share. Whenever a stock is showing a pattern like this, it can mean that large traders are buying any dip and paying up to have exposure to the stock. The SLV is now quickly approaching a big breakout if it can manage to trade above some near-term overhead resistance at around $42.78 a share.A move above that level could mean that the SLV is setting up for a big run back toward its recent high of 48.35 a share. If the bears can't hold it back here on any test of that breakout level, then the SLV could squeeze the bears who're short this ETF. The shorts could easily get persuaded to cover some bearish bets if the SLV sees a volume move through $42.78 a share. I would look to buy the SLV if it clears $42.78 on strong volume that tracks in close to or well above its three-month average action of 36.8 million shares. Another great way to play an SLV breakout is to buy some call options on the ProShares Ultra Silver (AGQ) since this trading vehicle moves twice the daily perfume of silver. That trade is more risky but will have a bigger reward if the silver breaks out here. Either way, make sure you manage your trades with tight stops in case any future breakout in silver is a false move.