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Commodity Chart Of The Day

Daily Silver

(click image to enlarge)

In the last three weeks, silver prices have traded lower by almost 10%, losing better than $3/ounce in December futures. As the chart above shows, a 38.2% Fibonacci retracement has occurred with this contract, finding mild support at that level. I view this as more than a pause than the conclusion of selling, and see more depreciation in the weeks to come.

I do not see prices violating the trend line drawn off the summer lows and as a buyer, the closer futures get to that level, the more aggressive I would become on behalf of clients. The dark blue line that currently resides at $30.25 is the 100 day MA, and prices should get close to that level, in my opinion. I suggest using the $30.75-29.70 as an exit window for shorts, and also as a buy zone.

Traders that are in bearish trade are likely trading December contracts, but when reversing, if that is what you choose to do, I would be trading a combination of December 2012 contracts and March 2103 contracts. In the coming weeks, I expect to have various futures and option strategies, as I see prices closer to $35/ounce into early next year. Given the chance to buy near $30/ounce is a great opportunity, in my opinion.

Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.

Source: Commodity Chart Of The Day: Silver