"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Tuesday, April 26, 2011

Silver - 8 hour chart update

Based on open interest numbers from yesterday's price action, we had a significant number of fresh short positions instituted in Silver on its run towards $50. Combined with record volume ( a mind boggling 319,024 ) it looks like we had a blow off top in silver for the time being. That high near $49.80 will now serve as the new resistance level beyond which silver is going to have to move before we can get a fresh leg higher in this market.

The market is now in the process of probing lower seeking to uncover support. Precisely at what level that will arise is unclear. It has found a bit of a respite from the selling near $44.60 but that looks fairly flimsy at this point. More substantial support lies closer to $43.50. Beyond that it looks as if $42 will be the next level.

To have a shot at making another run towards its recent peak, silver will have to close above $47.25, or the gap left from its Sunday evening open.


  1. Thanks a lot Mr Norcini.
    One question to you, but quite critical for me and my friends who invest in Silver around me : how dangerous does it become to trade on the paper silver (futures & CFDs) by now?

    COMEX stocks seem to be decreasing...are they likely to default soon? Is it still safe to trade Silver in the next few weeks?

    Thanks a lot for your advice,

  2. Henri...

    Your experience level is implied by your question.

    You should NOT be trading silver or gold in markets as volatile and manipulated as these are.

    If you do try to trade either of them, PLEASE only trade ONE contract with at least $70,000 to $100,000 MARGIN money left in your account.

    You could buy (go long) ONE 'far out' contract like December 2011, or even one from 2012 and allow the metals to go where they are going. This would allow you to not have to 'roll over' your contract until the month before the expiration of the contract you choose to buy.

    DO NOT count on taking delivery in the metal as there could be a lack of the metals for delivery in the future. They should be able to settle your contract in DOLLARS, assuming they are still worth anything.

    You could, as the value of your position increases, draw off a little of the profits to buy CASH METALS.

    But DO NOT decrease your initial margin as above.

    Alway be prepared for further margin increases which may eventually go to ALL CASH, or 100% as the 'big boys' squeeze the little players out of the trade.

    Better yet...just buy cash metals and hold them IN YOUR POSSESSION...NOT IN A BANK OR OTHER DEPOSITORY...to make sure you really have access to them.

    Then... take a nap and enjoy life while we still have one to enjoy.

  3. I for one welcome this dip. The chart was looking too wacky. I'm still looking for a dip to $36 - $37 sometime in the summer. This would be a perfect opportunity to load up for the move to $50 and beyond.

  4. Thanks Gold trader,

    Personnally, I'm trading on CFDs, not on Futures, not even mini-silver.
    So the ratio is 1000 $ profit or loss per 1$ variation on silver, per contract.
    Still, it's a derivate on futures.
    I managed 2 contracts, was quite lucky as I left a sell limit order at 49,60 which was executed last monday, so I found myself with 1 contract left, and cash is around 30.000 $ on my account for margin money left.
    I bought this first contract some time ago, when we got through 35 $ level.
    But I wonder wether I should keep it or not, given the situation (not volatility, but rather default risk and so on)

  5. Finally the start of a buying opportunity! Back up the truck!

  6. Henri...

    Regardless of the instrument you choose to trade, the general methods I described apply.

    Trade with extreme care as these markets are so volatile, and will become even more so, that a lightning fast move could wipe you out if the instrument you are trading doesn't have a built in stop to prevent losses beyond a known point.

    Even then, there are always reasons that a stop may not be filled where you expect it to be filled due to unforseen circumstances due to exogenous events in the world.

  7. SIL/SLV ratio made another new low again today. Pull it up on Stockcharts as SIL:SLV and it looks like the 2008 crash. Quite amazing how the ratio traders are making a killing day in, day out.

    XAU/GOLD ratio is also near the low end of the range. Same with OSX/WTIC.

    It is almost as if people are selling first, asking questions later, because they are deathly afraid of QE ending any moment now.

  8. Dan,
    Many moons ago I posted comments about how my friends and I owe you and Mr. Sinclair much. Your comments and honest advice (which came at no cost other than reading your comments on jsmineset) provided a much needed foundation to our families.
    At this time, I am unable to find silver or gold bullion in this area. Several very reputable coin shops and bullion dealers are completely sold out of silver bullion.
    One wholesaler is unable to quantify delivery schedules and while taking orders, makes no promises regarding actual delivery date from ANY of their mints. This included US Mint, Canadian mint, Aus-Perth, and Vienna.
    If I want to have shipment of silver in the category of 100-200 ounces or more of bullion quality silver, who has the silver?
    In months past we could locate inventory.
    Currently, we check in our areas (suburbs and rural) which are empty. Even the wholesaler in the big city near us is empty and can not take delivery due to delays at the mint and delays in transportation.

    How does one justify the paper Comex price when it is so abundantly clear that the actual bullion is NO WHERE TO BE FOUND and if it does appear for resale, the coin shops are charging as much as a 20% premium for a few ounces!

  9. arkel, I'm with you %100. I feel a larger correction will come in the next couple of months that might take us back to the $34-38 range. I'll be ready to buy then.

  10. Hello,

    I wouldn't call myself a trader per say. But, I do have investments in gold and silver. CEF, SLV, and some physical gold bullion. A few years ago I could see that the dollar as in trouble.

    With this being said, I just don't understand how anyone can believe that there will be a major correction in gold and silver and that the metals are in a bubble. The fed has no choice but to continue buying treasuries. If they stop buying them, the economy will tank and interest rates will rise. Moreover, the fed buys a disproportionate amount of total treasuries sold. Hence, the government will be forced to default. If the fed continues buying treasuries, the dollar will continue to fall in value. Gold and silver, then, must go up. There can be no serious correction and gold and silver are not in a bubble.

  11. ff621, I agree with your fundamental analysis. I am speaking more in technical analysis terms. Silver has had a huge run up close to $50. I feel it needs to set up a foundation at a lower level before it can move beyond $50. I am looking at a short term move similar to what happened at the very beginning of 2011. After that, I see it going beyond $50. I do not think silver is in a bubble, but nothing moves in a straight line, unless we are in hyperinflation which I do not think we are in right now.

  12. I'm sticking to the main stalwarts in precious metals. These YOU TUBER's lately are very questionable as to what they are up to. Seems like there's a group of younger people that just thrive on entertainment and are not being completely honest.

    The Weekly Telegram Says Don't Listen To Me

    This recent Silver Smackdown is awaiting some news. This afternoon is hinged on it. I don't think we are going to sit here between $43 and $49 for too long. We are going one way or another.


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