Last Wednesday, I wrote about about the Put-Call ratio in SLV reaching a one-year low. I mentioned you might want to start planning your exit strategy if you were long. The next day, silver hit a yearly high of $19.80 an ounce on Thursday, May 13.
This morning, silver is now trading at less than $18.80 an ounce, a fall of more than $1.00 an ounce since last Thursday:
Why does this happen? Once you get full participation on the bull side, there's a ton of sell stop orders sitting beneath the market price. Many of them are market orders. Once they start to get triggered, it can become a cascade of selling action.
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Do you think silver is ready to target $21.00 after this nice retrace back down to $17.92?
ReplyDeleteHi
ReplyDeleteI have been trading silver since last year. I'm switching to gold. The reason: while silver usually outperforms gold in times of rising economic confidence, gold generally outperforms silver in times of falling economic confidence.
Think of it this way: gold's a better safety haven, but silver's better when there's appetite for risk in the market. Just check out the silver:gold ratio and see for yourself.
Currently, I think we are transitioning to a time of falling economic confidence, so I will be focusing on gold.
In dollar terms, neither metal is going significantly higher while the dollar rallies. However, once the Euro bottoms out and starts to rally, I think gold could experience a significant rise - to $1500 - $2000 an ounce.
If and when that happens, silver should bust through $21 an ounce.
Why does this happen? Once you get full participation on the bull side, there's a ton of sell stop orders sitting beneath the market price. Many of them are market orders. Once they start to get triggered, it can become a cascade of selling action.
ReplyDeleteWhile everything you say is factually correct, I can't help but think the COMEX short positions unduly influence the price action in both gold and silver. Witness the number of gold call options out of the money in May when the price mysteriously couldn't break 1200 until after the NY close.