Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

Commodities

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: www.ETFTradingPartner.com

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 www.ETFTradingPartner.com

© 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.


© 2005-2022 http://www.MarketOracle.co.uk - 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