Before I write anything on silver, I must admit that I have been a silver bull ever since I started analyzing silver. I continue to be a very long term silver bull. I am unfazed by silver’s bearish trend over the past few years. I personally invest only in physical silver. I like to trade in physical silver. I am against investing in a silver ETF or any metals ETF. I must thank my friends in Kucha Mahajani Delhi (the gold and silver market in the heart of delhi) for forcing me to analyze silver before MCX opened in India. I started analyzing gold only after MCX opened in India.
On Friday (15th June 2018) silver had the biggest crash in the last eighteen months. Silver prices take a long time to recover whenever prices have crashed. This has been my experience in analyzing silver. Massive stop losses were triggered. Silver which was showing hopes to start a medium term bull rally, crashed when things were looking bright for silver bulls.
I have seen unlimited flash crashes in silver. I am never unfazed by silver crashes. This puts us to the question as to how to trade in silver? The few bad days (when prices move very sharply in one direction without any early hint.) can result in capital erosion.
The key thing which one should keep in mind while trading in metals (silver, gold or any other industrial metal), is to know the fundamentals. Metal prices globally are dependent on the current demand/supply balance as well as the future demand/supply balance. Metal prices can rise in weak fundamentals but will be vulnerable to flash crashes. If the fundamentals of silver are weak, then use higher trailing stop losses. Do not worry if the stop loss is hit. On Friday, 15th June, silver was sitting on weak fundamentals. The plunge in the global metals market added to silver bull’s woes. If fundamentals are strong of silver or any other metals, then prices will recover sooner than later. No need to worry, in case you are long and have the margin, then average it out. Remember, averaging requires very high margin money.
Remember key short term technical support/resistances as well as medium term support/resistances in your mind while trading. I am asking you to remember as prices plunge whenever it happens gives you very little time to react. On 15th June 2018, silver prices of MCX silver July futures plunged from a high of Rs.41698 per kilogram to low of Rs.40141 per kilogram. The flash crash started as soon as silver prices fell below Rs.41280 per kilogram. Key technical support was around Rs.40980 per kilogram. If you had the technical support/resistances in hand, then you would have reversed your trade on the fall below Rs.40980 per kilogram. In Comex silver July futures key support was at $17.13. One should have use a trailing stop loss around $17.13 if long and reversed on a fall below $17.13. Remembering the technical and reacting on the same helps to convert loss making trades into profitable ones. But never apply the reverse trade when prices trade in a range bound way. Both ways (buy/sell), there will be losses.
Silver has a tendency to trade in a range bound manner for a very long period of time and then make a big breakout. Silver tests the patience of everyone. One should determine the narrow trading range or wider trading range and then make the trade. Trading range can be determined using various short term technical. Comex silver July futures traded in $1619.00-$1686.50 between 7th May 2018 and 5th June 2018. Thereafter there was a technical breakout. To make the most profit determine the trading range and trade in the range using trailing stop loss. I have seen in India that most people never use stop losses when silver prices trade in a range. Once the big day of breakout or breakdown, these traders cry foul on their losses. The whole purpose of use trailing stop losses in financial markets and not just silver is to limit losses on days of big one way moves.
It is very easy to manipulate silver. Manipulation of gold and silver are over the internet. JPMorgan, Deustche bank have been manipulating silver for decades. One should not think of factors such as price manipulation. Never console yourself by some news. It is your money. You need a return on your silver investment. Manipulation news or any other news should be used to get a positive return on your investment.
My final word to silver traders
Silver is a very beautiful metal which has huge number of industrial uses. Silver trading requires patience. Those looking for making a fast buck need to look for other investment. Silver traders should allocate fifty percent to very short-term trading/day trading and the rest to investing. Over the past few years silver investors have had negative returns. Day trading or weekly trading helps to ensure continued flows of return on investment.
In the final line, I will say, that silver generates better long-term investment than gold.
Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, crypto currency, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. Prepared by Chintan Karnani
NOTES TO THE ABOVE REPORT
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