Going Back into Silver

[tamo42]

I opened a long silver position today for the first time in several weeks. From a technical perspective, it looks like a moderate base has formed.

The other day silver popped higher on news that the English were investigating JPM because of their role as both huge market maker as well as warehouser. The Brits seem to think this may be a conflict of interest, especially since JPM has such a huge potential to influence the small silver market. Silver has been up the past two sessions. Also the dollar has been weak the past few days on worries with the debt ceiling and developments in Europe.

So I opened a speculative long position with some ~.60 delta calls. I'm just talking about what I did, not a recommendation to anyone. I'm not terribly confident on how long this rise will last, but the lows in inventory numbers as well as speculative longs suggests there's a bit of room to run. My guess is to 41.

Here's a chart: http://stockcharts.com/h-sc/ui?s=$SILVER&p=D&b=5&g=0&id=p40616853038

Happy trading!

[smbgaiden]

I had a similar thought as you, but I did my entry into gold instead. On my forex account, I bought 99oz and am currently losing on it. I have some space below that I can tolerate, but hoping I don't have to tolerate it. Like you, it is what I did and not a recommendation.

[dobedo]

Last time I went long on silver, I lost close to 30% in a few days. This time I'm going to wait longer to go long. How long do you think I should wait to go long again?

[tamo42]

Like I've said when the hard correction took hold after silver hit $50, when you hear everyone talking about how silver is over and that it was just a bubble, that will be the time to get in.

No matter what, silver is a volatile market. It always has been, and it probably always will be. Plan accordingly.

[badon]

I agree. Waiting is not the right choice.

[r3globe]

Last time I went long on silver, I lost close to 30% in a few days. This time I'm going to wait longer to go long. How long do you think I should wait to go long again?

You can never consistently time tops and bottoms of markets. Dollar-cost averaging in and out is the best strategy IMO.

[badon]

I can:

http://www.livebusinesschat.com/smf/index.php?topic=1704.0

[r3globe]

I can:

http://www.livebusinesschat.com/smf/index.php?topic=1704.0

lol well, i am talking about normal people :)

[badon]

Haha, I always get left out :)

[badon]

Just thought you'd like to know: On the day this was posted (this was the only thing posted), LBC finally topped 300 visits in one day. But, we didn't just top 300, we blew right past it with 328 visits for May 25th. Our highest ever, prior to that was 299 on February 28th. Before that, it was 297 on January 25th, and 286 on November 13th 2010.

So, we seem to have been plateauing at just under 300 for many months, after a big run upward that took LBC from being a podunk-nothing site for 7 years straight, to being pretty active quite suddenly. It will be interesting to see if we are able to break through that 300 visits plateau to make it a routine thing, with resumed growth.

[tamo42]

Just goes to show that the demand for silver is still out there. Some analysts are forecasting that the prices for physical metal will diverge from paper silver. Basically that they will become two entirely different markets, where the physical will be subject to real market supply and demand while the paper market will be the land of jpm style manipulators.

[badon]

That has long been the case, though the difference is not extreme yet. The divergence is increasing.

[tamo42]

Well that was a fun 15% in a few days.

[smbgaiden]

Entered silver again today. Not a recommendation, just an anecdotal reference of something I did. Established position and may adjust tomorrow based on what happens and how I interpret it.

[tamo42]

Interesting. Sadly I've been focusing on other things so I missed this latest run. I did pick up some GLD a week or so ago though.

[badon]

Precious metals, coins, and other assets not under the control of the government should be doing well right now. I haven't been paying attention though.

[dobedo]

Yes, silver is doing quite well today - lost about 7% in one day. Ha!

[badon]

Looks like it took a small drop today, but has been trending upwards for a while. Oh well, I don't really follow what the metals are doing anymore.

[r3globe]

Here is an interesting development: If you go to APMEX.com right now and try to place an order, here is what comes up:

*Attention – Due to the uncertainty in the global precious metals markets, we will not be able to accept any additional orders until the global markets re-open in Asia. We expect to be accepting orders around 6:15 pm EST. Sunday August 7th, 2011, following the market open.

Hmmm a sign of the times , maybe!

[smbgaiden]

Gold up like a rocket http://www.kitco.com/

Silver up a little.

[badon]

Yikes! It's up 1.5% already, and the Eastern markets have only been open for a little while. Here's a better link to the info:

http://www.kitco.com/market/

[tamo42]

Both seem to be up about 1/2% on my screen right now.

A trader friend of mine says he expects Monday to be limit down on stocks.

[smbgaiden]

About 2% a piece positive now. That back into silver will be a nice point if things hold like this tomorrow. My only Hong Kong stock is down 9%. Also, on July 20 or so I hedged my long USA stock positions by writing covered calls at the money for 5%. Of course the market dropped more, so those will likely expire worthless, however I am now unhedged.

To kick me when I am down, the VIX calls I was buying for a August expiry and a $19 strike are now about 6x what I bid at. Seems they will open about 10x that price. In hindsight, should not have been so strict with my limit order.

[dobedo]

I'm still holding my SLV position until the next rumor from tamo.  Only down about 20% since the last rumor :)

[tamo42]

To kick me when I am down, the VIX calls I was buying for a August expiry and a $19 strike are now about 6x what I bid at. Seems they will open about 10x that price. In hindsight, should not have been so strict with my limit order.

Yeah, I'm in the same boat. I closed my VIX calls on Thursday! Granted, they were up 100%, but still!

[tamo42]

I'm still holding my SLV position until the next rumor from tamo.  Only down about 20% since the last rumor :)

Paper silver is a very volatile game. Gotta be quick on your feet (or fingers as the case may be).

[badon]

I'm not in anything but Chinese coins, and I'm doing GREAT! :P

[tamo42]

Got back into some SLV calls yesterday just before the close.

[dobedo]

Got back into some SLV calls yesterday just before the close.

Such a smart move!  I'm still locked in at when it's about $50 :(

[tamo42]

I wouldn't worry too much about it. I would be surprised if silver doesn't break $50 this year.

The margin-hike move has already been played. So when they tried the same thing in gold a week or so ago it did almost nothing.

[GhostRider808]

Such a smart move!  I'm still locked in at when it's about $50 :(

Yeah, no worries about Silver.  When's your expiry? 

[dobedo]

Yeah, no worries about Silver.  When's your expiry? 

Oh, I don't do options.  I bought SLV when silver is close to $50, so it'll "expire" whenever I sell, I guess.

[tamo42]

Calls are up about 30% on this recent pop.

[tamo42]

Cashed in 2/3 of my calls, free-riding the rest.

[GhostRider808]

Oh, I don't do options.  I bought SLV when silver is close to $50, so it'll "expire" whenever I sell, I guess.

Yeah, that's probably a safer bet.  I read most people lose money on options not unless your Tamo42 that is =).  However, with the S&P, DOW, & structural problems where it is...puts are starting to look really good!  Too bad I have most of my money in bullion and Chinese coins.  I kinda of feel like buying more silver bullion though as the near term it looks more attractive for bullion and long term Chinese Coins, hrmmm...

[tamo42]

Hah, I lose money sometimes. I just try to make it as rare an event as possible ;).

[badon]

I read most people lose money on options not unless your Tamo42 that is =). 

Tamo42 is the kind of person that could master pretty much anything. It's pretty impressive to watch, and even more fun to follow for free extra $$$ :)

[dobedo]

Yes, Tamo's rumors are all first rate, We welcome more of them!

[tamo42]

Closed out my position. I should have done it the other day, but oh well. Netted out 36% over the trade.

I think we'll see a short dip over the next few days as gold consolidates. The Jackson Hole meeting is this week and GDP numbers are due out Friday, so Thurs-Fri might be very volatile!

[tamo42]

Like I've said when the hard correction took hold after silver hit $50, when you hear everyone talking about how silver is over and that it was just a bubble, that will be the time to get in.

No matter what, silver is a volatile market. It always has been, and it probably always will be. Plan accordingly.

I find myself wondering if the current drop in precious metals (from margin calls on other assets most likely) will create the "silver is dead" moment I've been waiting for.

[dobedo]

What would be a good reentry point for silver? $30? $20?

[tamo42]

Depends on your time frame. If you are holding as a long term hedge against dollar devaluation, I'd buy small lots all the way down, then purchase aggressively once things head back up (probably a month or two). If you are looking for a quick trade, wait until the bottom is found.

[tamo42]

I was just perusing the news. Looks like the major catalyst for the gold and silver sell off was leaked news that CME was going to hike margin rates for the 47th time. The hike came through on Friday, so that's that.

After a sharp plunge like we've seen, don't expect gold and silver to go right back up. But in the long run, all the same market drivers are still in place. Monetary inflation is still raging, and eventually the market will remember that even though American monetary inflation now looks to be lagging other banks' monetary inflation.

[buynicething]

If you are looking for a quick trade, wait until the bottom is found.

Maybe a dumb question, but what would be the indicators that we have found the bottom?

[tamo42]

Maybe a dumb question, but what would be the indicators that we have found the bottom?

Not a dumb question at all. Fundamentally, I'd expect to see consolidation in the price levels. Consolidation is when there is a lot of trading in a very narrow range. So after this big drop, I expect silver to bounce around a while wherever it ends up. The traders with losses have to be weeded out psychologically before new bulls can come in.

Indicators are secondary to price action, but I like to look at a series of moving averages (including MACD), volume trends (actual volume and OBV), ATR, and various oscillators like RSI.

[buynicething]

Does the consolidation period have an average time frame?  Or is it widely varying?

[tamo42]

It just depends on the circumstances. If you want some heavy reading, check out Richard Arms' books on volume analysis.

[buynicething]

Thank you for the information Tamo.  I will make sure to keep the notify on for this topic.  Your analysis here is highly interesting.

[tamo42]

Always happy to share!

[tamo42]

LOL, here you go dobdeo:

Silver will be above $45 before November 30, 2011

Wynter Benton is claiming that silver will be back above $45 shortly.

[dobedo]

Good tip, Tamo! By then I can sell it for a loss of only $5. Cheers :)
BTW, who is this Benton guy? A friend of yours?

[tamo42]

Benton is the guy (or gal, or group) who is supposed to be a former member of the JPM inner core. Something happened, and now Benton is out for blood. Each of these predictions is usually accompanied by some personal insults hurled at JPM executives.

In the past his predictions have accompanied massive moves in the market, so some people suspect Benton has access to huge amounts of money that can move the silver market.