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Sideways Trading Will Give Way To Higher Silver


  • Silver has been in a range.
  • The dollar is guiding silver, for now.
  • The technical levels to watch.
  • Three reasons why the upside will eventually give way.
  • Two ways to play for the break higher.

Silver is the most volatile of the precious metals. Since 1980, the price has traded as high as just over $50 per ounce and as low as $3.51. The most recent high in silver came in 2011 when the price reached $49.82, a level just shy of the 1980 all-time peak. Since then, the precious commodity declined to a low of $13.635 in late 2015 and rallied to $21.095 in July 20016. Nearby May COMEX silver futures were trading on Tuesday, February 27, at $16.425 per ounce, close to $1 below the midpoint of its trading range over the past three years. Since the start of 2017, the range in silver has narrowed to $15.15 on the lows to $18.655 on the highs. The price is currently around 48 cents below the midpoint of that range on the May futures contract.

As a volatile metal, it is only a matter of time before silver decides to finally break outside of the narrowing trading band which is like a rubber band. When it eventually snaps, it will take the market by surprise, and the move is likely to be fast and furious.

Silver has been in a range

Since silver declined from the highs of $49.82 per ounce in April 2011 to its low at $13.635 in December 2015, the price has been in a range that is a lot tighter than the magnitude of the over $36 drop. In fact, the $7.46 range over the past three and one-half years is almost five times narrower than the decline from the high to the low.

Source: CQG

As the monthly chart highlights, silver went to sleep, and we have seen the trading range narrow to around $3.50 since late 2016. Open interest, the total number of open long and short positions on COMEX silver futures has

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This article was written by

Andrew Hecht profile picture

Andrew Hecht is a 35-year Wall Street veteran covering commodities and precious metals.

He runs the investing group The Hecht Commodity Report, one of the most comprehensive commodities services available. It covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

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Comments (16)

Dr Rick Gold profile picture
Silver looks poised for a big move. Added today to both USLV and UGLD positions, that I usually buy as a pair. Put in another limit to buy more USLV at 10.00 at the close.

I’d be happy with 20%, but think 50-60% is in the realm of the possible, by April sometime. We shall see.
BorrowedTime profile picture
I like USLV under $10, just be patient.
Is silver have upside tailwind
because of his industrial use in electricity (solar panel and others ) ?
takeone1 profile picture
Hi Andy
Trading sardines can only be read if you fork over a subscription fee to Pro...have a good one!!
Yup, levered ETNs are not long term plays unless you want to sleep like a baby, wake up often and crying. Regular options are not much better, you have to get the direction right, the time period right, beat the spread, and beat commissions, tough in the long run unless you are pros like the Najarians. They are smart to follow "unusual activity" which usually means inside information. But by the time most of the regular Joes get the information, it is probably too late.
BorrowedTime profile picture
The problem with USLV is that it’s not a true silver play, don’t believe me, then look at the 5 year chart. Another example, I bought more last week. The next day silver closed up 1.38%, but USLV only moved up .38%, when it should’ve moved up about 4%. Basically, although it’s 3x silver, it’s still an ETN and will trade as supply and demand determine so. I can no longer trust this ETN and won’t be buying 1k+ shares anymore.
Eric Peterson profile picture
Note that silver futures price changes are quoted from the previous day's 1:25 pm ET settlement, while USLV price changes are quoted from the previous day's 4 pm stock market close. So when you say silver closed up X% and USLV closed up Y%, it's normal that Y is not 3X. They are different time periods.
BorrowedTime profile picture
It depends on the day. Many days USLV is directly proportional with silver, then some days it’s not. I’ve bought and sold it many times, so I am very familiar with the pattern and trend. I’m not against it, I like it, but it’s not 💯 reliable.
Eric Peterson profile picture
Yes, when there is no movement in the futures prices between 1:25 pm and 4 pm, then on the next day the percent changes quoted for USLV and the futures should be very close to 3-1. Otherwise, not. It's necessary to compare the exact same time periods when comparing price changes.
Bought some silver bars from a pawn shop at $10 per ounce a long time ago when I was on a win streak in Vegas. If the technical triangle resolves lower in line with the long term trend I will gladly buy more bars sub $10 to supplement my SIVR holding. If it resolves up I will happily take some profits. Will stay away from miners for a long term holding, have learned over the years that metal in the ground is only a mirage. Unless you get a dividend only management profits long term unless you can find greater fools to buy higher, especially when the CEO's pay equals or is more than profits, if there are any. And any excess profits will probably be used to buy more stuff in the ground to keep the Ponzi scheme going.

It should be pointed out that the highs and lows are not inflation adjusted. Given that, I believe that the current silver price is once again closing in on an all time low. The problem remains, as the author aptly illustrates, is that silver and thus the miners themselves are sitting on a rather large short-term downside potential. With volatility and direction remaining extremely sensitive to the whims of both political and market forces. Silver seems like a tough play unless you are sitting on millions of ounces of sub $10 silver like a certain bank we know......
buddyrow4 profile picture
i agree
I believe that this is the first time in COT history that silver speculators are net short silver. What will it take to wake silver up? Who knows? This is called answering one question with another question. LOL
takeone1 profile picture
Hi kimbillro,
here's an article you might be interested in..Has to do with CoT..have a good one!!
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