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While the equities markets have been having an interesting time lately, Silver has also been intriguing (SI-SpotV in ProfitSource). Earlier this year, many Safety in the Market traders made a nice profit from the run into the April top (and the subsequent fall) and this week we’re going to look at that April top and potential opportunities in the current market.
There are a number of ways to trade Silver. A futures contract known as ‘big’ Silver moves at $5,000 per point and requires a margin of $21,600, while mini silver contracts move at $1,000 per point and require a margin of $1,900. Silver can also be traded with a CFD and these will vary depending on your broker, but a typical broker moves at $200 per point with a margin of 4%.
Chart 1 shows the Aril top for Silver. We can see it was a 100% repeat of the range from 1971 to the 1980 high, but it was also approximately six times the October, 2008 low. Further, on the smaller picture, it was at 150% of the last weekly ABC. All of this is shown in Chart 2. Chart 1: SI-SpotV Weekly Bar Chart with Repeating Ranges
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Chart 2: SI-SpotV with Weekly ABC and 6 x 2008 Low
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For this trade we could have used a first lower swing top entry on May 2nd and by trailing stops behind swings we could have achieved a reward to risk ratio of almost 6:1, stopped out on May 24th, as shown in Chart 3. Chart 3: SI-SpotV Daily Bar Chart with Entry and Exit
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Silver has been in a sideways move since then and has only recently pushed up through 50% of the run down from the April top. This prompted me to investigate previous major turns in Silver and I found there is often a second run down approximately 120-days after the initial turn. If you have studied Time by Degrees, you might alsolook at this in degrees. Chart 4 shows the action after the March, 2008 top and the subsequent fall 120-days later. Chart 4: SI-SpotV Comparing 2011 with 2008
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Students should also look at the market action that followed the 1983 and 1987 tops. Here you will find time-frames closer to 90-days than the current 120-days. I will be watching Silver closely in the coming days and if a nice ABC short presents itself under the 50% level, this might present a trade I’d be interested in.
While you shouldn’t take your eyes off the equity markets, there’s nothing to stop you stalking a setup that might just add a Silver lining to your trading!
It’s the Journey!
Lauren Jones
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