The "Circus Tent" Chart: What 130,000 Hours of Trading Taught Me About Silver (SLV)
Risk managers will gladly miss a few ticks of upside to avoid being "last one in the pool"
I’ve looked at a lot of charts in my investing career. 45 years times 60-70 hours a week = “I’m no newbie.” So when I see a chart that looks like a circus tent, I take notice. So does the automated version of my 130,000 hours of chart-reading, the ROAR Score.
For those who were able to take their eyes off the stock market from last Thanksgiving through January-end of this year, they got to see quite a circus act. Death-defying heights in the form of anything attached to Silver. The commodity or the mining stocks.
Silver is a small part of the market. But for a while it became a lot bigger. Then, a combination of excessive speculation and inevitable adjustments in margin requirements by regulators crashed the party. And SLV. Here’s what the picture looks like. Right side - circus tent - am I right?
This is far from the only “parabolic” move we’ll see this year. These modern markets are driven by algorithmic trading, as well as supply-demand imbalances that can take a smallish commodity market like Silver, and make shareholders feel like they won the "Golden Ticket” in the Willy Wonka movie.
But ROAR looks at things different. It literally stands for RETURN opportunity and RISK. It acknowledges, as I’ve learned over the decades, that trees don’t grow to the sky. Even Silver trees.
But ROAR is an automated process, one I built with my friends at PiTrade.com. My time-tested approach, their brilliant programming and entrepreneurial ability to bring it to life. And now, investors finally have a market analytical tool that has a habit of saying “hey, not so fast, there’s even more risk, now that the price has shot up like that.”
How historically rare was the up and down route taken by Silver (SLV)? As we see above, its ROAR Score actually fell to 0. That is a true “tail risk” event.
But what is more impactful to investors, and why we brought ROAR to the public, is because of what you see below. ROAR is not your standard “buy/sell/hold” system. It focuses on RISK of major loss, acknowledging that anything can go up at any time. And for any reason. Welcome to modern markets!
But what I’ll point out below is the fact that the ROAR Score for SLV never reached the “green” level at any point during its runup. When your priority is risk management, and an ETF or stock zooms higher like Silver did, it doesn’t let you in comfortably.
So what did ROAR tell us from $40 up to $105? That this was not a “steal,” but rather a pure momentum play. Translation: it’s a “rental,” not something to own. Because the whiplash is what gets you.
Put another way, in my own trading, I managed around a position in SLV. But I did it in with one foot out the door from the start to the finish. By hedging, the way I mentor the folks who are in our live group sessions, which you get by being part of the Premium membership at ETFYourself.com. Put options, collars, smaller positions using leveraged and inverse ETFs. All of it, NOT for speculating, but for zeroing in on defining my “worst case scenario.” Before the manic price movement occurred, not in reaction to it.
ROAR helped guide me, such that I did not get delusions that a triple in SLV in a short time frame was the start of something even bigger. Today it’s Silver I’m discussing, but risk is everywhere. Waiting to be managed.
And that’s why, over the coming weeks, I’ll be writing more frequently in this format. Shorter posts, but with the same concept: telling stories that help explain:
What ROAR is, and how ROAR Scores work
The benefits of the methodology, but also the tradeoffs. Because there are ALWAYS tradeoffs in investing. Don’t let anyone tell you otherwise. Return Opportunity AND Risk, right?
I’ll also keep reminding you of a few ways you can follow along with us, as I unpack decades of hands-on professional investing experience, one post at a time.
Quick posts about market activity as seen through the eyes of the ROAR Score. Free for now, at least. Just sign up with your email to ETFYourself.com to join our rapidly-growing Substack community.
Become a paid subscriber, and join all those who are glad they spent $150 a year or $15 a month to be in the know.
Become a premium subscriber, which gets you a seat at our weekly live sessions. We host them Tuesdays at 4PM ET, and recordings are sent out the following day. This is your opportunity to learn directly from me, as I show exactly how I use ROAR and other investment tools to manage my portfolio. This group gets first dibs on all we do here.
Sign up for free at ROAR.PiTrade.com, to test-drive the ENTIRE ROAR analytics system. Research ETFs and stocks, build portfolio models, learn risk management. Has there ever been a better time to do that?
Grab one of the first 1,000 free spots at PiTrade.com. They recently announced that those investors, with even a small account size, will have management fees waived. Permanently.