For all of you technical junkies out there, it may be time to take a closer look at silver and its respective investment vehicles. In the past few days, silver completed the “golden cross” as its 50 day moving average jumped past its 200 day average. This comes as good news especially given that the commodity suffered a death cross back in November of 2011. A moving average crossover is a lagging technical indicator because it generates a delayed signal that a trend reversal has occurred, making this a potentially significant event [for more silver news and analysis subscribe to our free newsletter].
When a shorter-period moving average crosses above a longer-period moving average, as has happened with silver, it is commonly referred to as a “bullish crossover”. A bullish crossover implies that positive momentum is prevailing as the near-term price increases of a security outpace the longer-term average price, thus signaling a positive trend reversal. The golden cross moniker is specifically reserved for the 50 day average crossing the 200 day average. The chart below shows this pattern in SLV as the 50 day MA (blue line) eclipsed the 200 day MA (yellow line) in the past few days.
Some may not buy into the technical analysis side of the equation, but for many this signals a bullish momentum that could propel silver forward for weeks to come. The precious metal has already been performing quite well, now with technical indicators aligning in its favor, silver may be set for a strong close to 2012. Investors will want to keep a close eye on funds like the iShares Silver Trust (SLV) as well as the Silver Miners ETF (SIL) as they will likely be big movers in the coming trading sessions.
Disclosure: No positions at time of writing.