Silver is higher by nearly 5% today trading to its highest levels since 6/19. Since 6/28 when September futures traded as low as $18.17 (33 month low) prices are higher by 17.4%. Two significant developments in the last two trading sessions…a settlement above the 50 day MA (light blue line) which had not occurred since 2/4 when futures were trading $32/ounce and perhaps more notably a penetration of the down sloping trend line (red line) that had caped all upside attempts since February.
The train appears to be leaving the station and my clients have yet to jump on board. This is the type of trade that we are on the sidelines wishing we were in but I’d rather be in that position with clients than in the trade wishing we were on the sidelines. Next upside resistance is seen at the 100 day MA (red line) currently just above $22.50…a further 5.5% appreciation. I will be looking for a retracement and retest of the 50 day MA to see if it makes sense to get clients positioned in bullish trade out until December.
Looking at two things today, a weekly chart of silver and what the seasonality looks like in Q4 convinced me that on a retracement I will try to get clients bullish exposure. Of course technicals alone and historical patterns do not make this a sure thing so tread lightly as silver can be one of the most unforgiving commodities if caught on the wrong side. One hesitation I had was thinking the greenback could stage a rally and that it could act as a drag on silver. However if prices remain range bound in the dollar trading between 84 and 81 much like we have in the last six months I think the buck could have minimal bullish or bearish impact as silver would be impacted by its own circumstances. Also I want to have clients positioned in more markets that would likely appreciate on hints of inflation that could come from the September FOMC meeting. For example long more commodities and short stocks and the debt complex….look for trading ideas in the weeks to come to support this thesis.
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