Silver Futures have moved sideways this week forming a pennant!
Silver has moved sideways this week forming a pennant! While we see that the market could still potentially move lower, it is not likely for it to dip past the $30.00 range. It has separated from the Gold Market as a safe-haven product. The safe-haven products typically are the Treasuries, US Dollar and the Precious Metals during times of uncertainty when investors do not like entertaining the high risk products. In this case, we have the Silver viewed as more of an industrial product! Industrial products will move in sync typically with the global growth. Copper is a market directly tied to industrial growth. Typically, when viewing growth prospects, we view China and the potential building projects within the Asian nation. Reports of factory growth have succumbed to the derailed shipments from Japan with both auto and tech parts. As of late, China has warned its banking and brokerage advisors to caution their clients of the volatility and risk involved with trading Silver. The exchanges that trade Silver have increased the margins to make it difficult for the average investor/trader to include Silver in their portfolios.
Chinese and Indian inflation have also pressured the metal. The stronger US Dollar makes it difficult to purchase the metal. While the Silver has been moving sideways with very little progress, it has also found support at these levels and it has been my experience that a market that one simply cannot bear to watch any longer will suddenly take off. In the case of the Silver Market, we have a potential default in Greece where a bailout resolution cannot be decided upon even with an emergency meeting from the Euro Zone officials. Germany had suggested a potential extension to September in discussing the stabilization. Contagion fears had extended into the banking sector and Portugal/ Ireland/Spain are not far behind. The US has potential concerns regarding their credit ratings dropping from the AAA status.
There could potentially be forces looking to garnish more interest and allocations in the US Dollar steering investor sentiment from the Silver Market. Regardless, the precious metal has been favored in many years past by investors looking for a currency that would hold value in the most horrendous times! The Silver product as an industrial metal is still used in manufacturing, which could potentially pick up the second half of this year. China may also return to the marketplace as a buyer. They require the metal for industrial use and the investment community within China desire to hold the metals for security.
Bangkok Thailand: The Thailand Futures Exchange has announced that they will be trading Silver Futures starting June 20th with a 100 ounce contract size.
While we hate to see a washout in the marketplace, occasionally they are only a reflection of the previous move. Retracements are a necessary part of the equation. After all, that is a reflection of the Fibonacci Retracements. The margins may prohibit traders from taking the futures positions, but the options may be a way to garnish the benefits of the increased volatility and define a prescribed risk for the trade.
Technically speaking!
The July Silver contract had hit a high of $49.845 and just seemed to back off of the $50.00 target that many analysts had touted! We have retraced and perhaps are ready for another leg up! There may be overhead resistance at $38.00 – $40.00. The pennant formation often may signal a sharp move after that quiet flat lull.
~Silver Chart~
We look for support at $32.30 and we see this market in sell mode temporarily! Look for entries to buy on the break-out through $36.25 and trail the stops.
It is suggested to always keep a stop-loss on a position immediately after it is entered. It is also suggested to stay alert and focus to stay Silver Savvy!
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
