What a week it has been for commodity traders! Silver, in particular, continued to move at the fastest pace in 30 years. In the process, it has been getting a lot of attention. For example, on Wednesday, silver was the theme of the day on CNBC , with crowds of experts of varied pedigree trying to explain what was happening. While individually they sounded like they new what they were talking about, collectively it was simply confusing, especially to casual trader, the type that is most likely to watch the channel, perhaps looking for some pointers. CNBC would serve its audience better if they had, say, one guest on a subject in a single day. Right or wrong, the comments would be much clearer…
After opening the week at around $48 per ounce, the price almost immediately dropped about 6 full points in 30 minutes. It rebounded a little bit, but then the down trend resumed all the way to 34.26 on Thursday, and probably it is not over yet. It s for me, though, or just about. I closed most of my silver short position earlier today. Ten full points in 4 days is enough.
The trade was opened at 44.45, using weekly candlesticks for analysis. My main reason was the parabolic nature of the rally, which, at this pace, was simply unsustainable. A sharp correction was more and more likely with every week, day even. My objective was 32 and realistically I expected 2-3 weeks for that level to be reached. The drop was so fast, that it is assuming parabolic characteristics itself. At this point it can easily jump 4-5 points in a matter of hours, so I decided to pocket most of the gains, at 34.41, for 10 full points and some change. The very small residual position will be closed at either 32, or before close of the week.
Since I am not a position trader, this is enough for me – I am out of the silver business for now. It still could move much lower, if 32 is broken 22 becomes the next objective, but it probably will be at a slower pace. It would be nice to be able to find set ups like these more often, but that is very unlikely. After all how often is it even possible to capture 10 points in silver in a less than a week ? Once every 30 years? As is, that is most likely the trade of the year.