Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Silver Futures Reversal: Can the 2008 Highs Be Taken Out?

Commodities / Gold and Silver 2010 Jan 12, 2010 - 02:50 AM GMT

By: Mark_Brown


Best Financial Markets Analysis ArticleTrading Silver Futures: Silver bulls have been rewarded for their patience during the recent sell off with a very strong bullish weekly reversal bar, one that also forms one end of a very nice up trend line (see dotted blue line on the chart). For the moment, the momentum is now back in the hands of the bulls, and there seem to be numerous technical clues that suggest that another attempt to take out the March 2008 near $21.19 may be launched soon. A look at the weekly chart for cash Silver may help us discern how far this new reversal may run.

Silver Futures Trading

Graphic credit: Metastock v.11

Trendlines, Oscillators and Fibonacci

While the pullback since early December was widely anticipated, due to easily identifiable price-momentum divergences, it has apparently ended in abrupt fashion, by way of this week’s wide-range, bullish reversal bar. With accelerating trend lines firmly in place and fresh oscillator buy signals being flashed, Silver should have little trouble adding a dollar or two to its current price before stalling out again. There are two main factors that lead me to that conclusion:

1. Every time the StochRSI indicator (a hybrid indicator combining aspects of both the Stochastic and RSI indicators) has made a bullish cross above its lower signal line during a confirmed uptrend (an up trending market being characterized by a series of higher highs and higher lows, as is currently the case in weekly Silver), price has rallied to a noticeable degree; note the four red circles near the bottom of the chart to witness the StochRSI’s follow-through toward (and then beyond) its upper signal line during two recent bullish phases in weekly Silver. The price bars have been shaded green to highlight the price gains made in the aftermath of each bullish crossover, and every benefit of the doubt should be given to this new signal, too.

2. The second tip-off that Silver may have enough of a fire burning beneath it to get it moving higher is the fact that it appears ready to cross and then possibly close above the 79% Fibonacci retracement level at $18.50. Silver exceeded this price in early December, but failed to close above it on a weekly basis, so this would be a very bullish development indeed. The main sub -100% Fib levels are 23.4%, 38.2%, 50%, 61.2% and 78.6%, and if a stock or commodity can successfully retrace more than 78.6% on a closing basis, the odds are pretty good that a full 100% retracement will eventually be seen. Fib experts also know that prices will frequently reach one level (in this case, 78.6%) before briefly pulling back to the next lower level (61.8%) before continuing higher. Last week’s reversal bar turned higher just above the 61.8% Fib retracement level of the March 2008- October 2008 sell off, and is now just 5 cents shy of the 78.6% level.

3. On the fundamental side of the equation, Large Speculators (hedge funds) are still carrying substantial amount of long exposure in Silver futures; while not at the record-breaking quantities seen a few months ago, it still is suggestive of massive hedge fund bullishness in the white metal. Of course, the Commercial interests are still carrying extremely large short positions, so expect plenty of tug-of-war price action as each rally of sell off ensues.

Sell a Put.

Here’s a simple, easy to comprehend trade that almost anyone with a futures margin account could qualify for – selling a March 2010 Silver put option with a $15.50 strike price. The put recently settled at $.051, or $255 before commissions. With an expiration date of February 23, 2010, there are only 44 calendar days remaining on this one, and the odds are excellent that this particular put will expire out-of-the-money (OTM) at options expiration.

If you glance back at the chart you’ll see the long (lower) blue dashed trend line; this may be a very tough support level (currently at about $15.70) for Silver to crash through within the next 44 days, especially given all of the bullish factors previously discussed. All in all, this could be a great way to pick up some cash, cash that the market is almost begging somebody to take. Consider selling the put for $.050 or better and then wait for either the option to expire worthless or to double in price, at which point you’d buy it back for a small loss.

Keep a close eye on the two trend lines for sharp breaks lower during the lifespan of the trade, as they are your two most valuable tools in helping keep you on the right side of this otherwise low-risk option sale setup. More timid traders might even consider closing the trade out early, say, if the option’s value declines to $.020 of less. Sometimes, when trading the futures markets, it’s better to settle for ‘most of it’ rather than demand the market to give you ‘all of it’ and then ending up with ‘none of it.’

That’s certainly something to ponder should you decide to take this otherwise very attractive put option sale in March Silver. Stay tuned for more developments in Silver, Gold and the US Dollar as they unfold, right here; 2010 may turn out to be one of the most exciting and volatile years in recent market history, offering well-educated traders and investors the opportunity to capitalize on prime trade setups.

By Mark Brown

To receive more information on trading ETF funds visit my website:

Mark Brown is an independent trader who focuses on trading ETF funds. He has been involved in markets and money management since 1998. His unique trading model which uses a combination of analysis like: economy, market cycles, chart patterns, volume, market internals, and money management. Visit his site: ETF Trading Partner

© 2010 Copyright Mark Brown - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules