Silver has battled this trendling for 13 Years!August is officially in the books, and other than Platinum rising $100 from $885 to $985, there was little to get excited about. Precious Metals were flat, where hot economic data and a hawkish Federal Reserve supported the U.S. Dollar and Treasury Yields, further pressuring prices. As the month went on, softer prints from Consumer Confidence, ADP, GDP, and Jolts data cast doubts on the Fed's ability to maintain its hawkish stance. The September FOMC meeting now sits at a 93% chance that the Fed will leave interest rates unchanged.
Chinese Stimulus
China made another attempt to support its economy overnight by cutting the reserve requirements on foreign currencies. The immediate reaction was a breakout in Copper prices and a retest of the 200-day moving average. Still, as the day session progressed, better-than-expected employment data left traders uneasy ahead of the long weekend, booking gains in Copper and reducing exposure in Precious Metals.
Silver is stuck in a Trading Range
Silver futures started the week on a firmer note but fell back as the week progressed and look susceptible to a more extensive correction next week. In the last article, I indicated that breakout traders will use a close above $24.75 to establish new long positions. However, the lack of upside momentum makes me question the strength of this "bull market." Those long Silver will want to use $23.79 as their stop-out point or short-dated put options such as the "week two, $24.50 puts" for protection.
Remember, prices remain trapped between $23-22 on the downside and $26-25 on the upside and lack a real catalyst to trade any higher. For those of you who are "perma bulls" on Silver, it would be wise to wait for a correction before adding to positions.
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*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
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