Tuesday, April 26, 2011

Trade Update: SLV

Well there it is. The SLV going hyperbolic on hyperbolic volume as well. But this cannot go on forever. It looks like we will have a pullback in the morning.

Silver traded within pennies of $50 per ounce yesterday and pulled back significantly. As you can see in the chart below. Is this a free market pullback or one last hurrah for the market manipulating house of Morgan. There is no way to tell. On the one hand $50 is technically resistance since it is silver's all time high. Coupled with the overextended status of this ETF this pullback could be genuine and present a buying opportunity for those fortunate enough to be in cash. On the other hand it makes perfect sense for Morgan to make one last desperate attempt to put the Genie back in the bottle here. A break above $50 would be a breakaway for silver and a force majeure for the bank short the shinny stuff. The prior resistance aids in covering the tracks.

Live 24 hours silver chart [ Kitco Inc. ]

I hate to guess, but I love to prepare and I would be prepared for a giant gap down at the open. What we have to defend ourselves against is them trying to take SLV down ten points or so like the good ole days. A bigger thing to protect ourselves against is the probability that this ETF will no longer be trading in a few months. I think that the latter is a problem of concern with the physical metal trading over $50 per ounce.

In a perfect world tomorrow, we will get out at something reasonable and get back in a few days latter under $40. We could run with silver long again until it breaks $50 and exit to wait and see.

Be prepared in the morning. It will be pretty ugly.

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