Silver markets initially fell on Monday but then turned around to show signs of strength yet again. Silver has been one of the better performers that I follow, and it is worth noting that now it appears that we are trying to make a much bigger move to the upside, despite the fact that it is a very thin time of year. After all, silver is a very erratic and dangerous market at times, so you would be forgiven for not paying attention to it right now.
Silver has touched the 50 day EMA but pulled back just a bit, but it certainly looks as if it wants to go higher. Short-term pullbacks will continue to attract value hunters and I believe that the $21.50 level underneath is your “double bottom” that you have to pay attention to with silver in general. I think at this point in time the market is likely to break above that 50 day EMA and then go looking towards the 200 day EMA which is well above the $24 level. Pay close attention to the US Dollar Index, which has a massive negative correlation to the silver market. If we start to see the US dollar lose it a bit, that will be reason enough for silver to take off. On the other hand, if we suddenly see a lot of US dollar buying, that can work against the value of silver as well.
This time of year things do tend to get a little bit erratic, so I would not put a huge position on. But I do recognize that it appears that silver is trying to return to the top of its longer-term range, meaning that it could go as high as $25 or so. It is a pretty big move, but it is one that you have to be very patient with and you do not want to jump in with a huge position because silver can be very expensive and dangerous on headline risks. I will continue to look at pullbacks at this point in time as potential value opportunities, only adding to a position once the trade starts to work out in my favor and then adding as I go along to compound profits the best that I can over the next several weeks.
