Since bottoming on 6/28 silver futures have appreciated 37% and this happened in two months time. Whenever a commodity moves that much whether it is higher or lower it should be recognized as that velocity is not sustainable. Futures are running into resistance at the 38.2% Fibonacci level just under $25/ounce. One should notice that futures failed at these same levels in April. Past performance is not indicative of future results.
A trade back to the 100 day MA (red line) is my forecast in the coming weeks. Stochastics are extremely over bought and though the lows may be in I do think we get some back and fill before additional upside is seen. The fact that the US dollar is catching a bid and trading above its 20 day MA could also act as a ball and chain. A 1.5-2.5% appreciation in the greenback in the coming weeks should coincide with a correction in the metals. Continued instability in the Middle East could buoy prices short term but as the title suggests markets do not move in a straight line. In order for further appreciation to play out a healthy correction is needed.
Silver Futures chart for August 28, 2013
After a near $7/ounce appreciation a $2.50- $4 correction seems reasonable. A trade back to the 100 day MA would represent a correction of $3 while a move to the 50 day MA would represent $4.50.
Three Silver trade ideas:
- Short mini-futures in December
- Short standard futures in December and sell a put 1:1 as a hedge. A $23 put can be sold currently for $5,100. The current delta is 23%.
- Bear put spread…see the chart below of a December $23/20 bear put spread. It would have a positive delta of 20%. At $3 wide this represents a $15,000 spread. This spread currently costs $3,500.
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As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: mbradbard@rcmam.com or 954-929-9997
Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.
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