Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199


Search Silver Prices
Silver Price
[Most Recent Quotes from] Our RSS Feed

Silver Updates by Mail

Enter your email address:

Follow Us on Twitter
« The ‘G” looks set to leave the PIGS | Main | Where is the Global Economy Headed? The Experts Weigh In »

Silver stops triggered bringing a buying opportunity a little closer

silver chart 06 May 2011.JPG

This sell off has certainly triggered the stop loss orders which no doubt were being moved up in line with the move in silver prices. We have seen many of these sharp pull backs, this one brings a buying opportunity ever closer. As the technical indicators show, from overbought to oversold in a matter of days with the RSI now down to 31.62, the STO is almost on the floor followed by the MACD.

The ECB have kept interest rates unchanged which gave the US Dollar a little boost, which in turn added to both gold and silver's woes. The charts were sitting in oversold territory inviting some profit taking and throw in “Sell in May and go away' and the scene turns ugly. The rule changes inflicted on silver prices also played their part and is best summed up by this excerpt from Greg Canavan in Sydney of The Daily Reckoning in Australia:

Silver is a fascinating metal because throughout history is has been a monetary metal. During the late 19th and 20th centuries it was ‘de-monetised’ (via coercion from the US and Britain, we should add). But its unique properties saw it become widely used as an industrial metal. Due to monetary mismanagement by the issuers of paper currencies worldwide, in recent years silver has again come to be seen as a monetary metal. It now fulfils two roles and is hugely important.

-- But there is another game going on in the silver markets. To understand what is happening you need to know that, like other commodities, the prices you see quoted every day are set in the ‘paper’ markets. That is, the futures market.

One silver contract represents 5,000 ounces. At say, $40 an ounce, this represents a position of $200,000. But you don’t need to pay that upfront. You put down a ‘margin’ instead. Back in January, the margin set by the CME Group (the owner of the futures exchanges in the US) was $11,138. So to get exposure to $200k of silver, you need to come up with just over $11k. That’s leverage.

-- Since late March, the CME has continually increased margin requirements. That’s fine in a rising market because it wants to make sure its not encouraging more leverage as the price of the metal rises. Fair enough.

-- But what is truly strange is the CME’s actions over the past few days. It has continued raising margin requirements even as the price falls! Effective 5 May, the initial margin requirement to buy a silver contract is now $18,900, up from $16,200 just a few days before. Then, from 9 May, the margin requirement will increase again – to $21,000!

-- At the current silver price of around $35, that represents a margin of 12 per cent. This compares to a margin requirement back in November of just 6.5 per cent.

To read this article in full please follow this link: The Daily Reckoning Australia

All the best.

We recently reported that had closed another two trades for profits of 108.52% and 116.67% respectively, this was followed with two more profitable trades so the chart and stats have been updated accordingly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.

sk chart 04 May 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments (8)

Ok it's not been a great week for my silver investments..I'm a small

May 6, 2011 | Unregistered CommenterGerardo

Isn't the margin requirement applicable to the sellers as well. So in essence shouldn't a margin increase reduce the volume as both the buyers and sellers are limited by their capacity to put up the margin money. Why is the price falling? Are the bears stronger or more in number and flush with funds to handle the margins?

May 6, 2011 | Unregistered CommenterSam

I am not covering until it gets to 22.50 or around.
Bears , cheers! We did it and we are awesome! Stay short.

May 6, 2011 | Unregistered CommenterDi

Yeah, "strange," as in "ordered by JP Morgan."

I've been moderately invested but lighter than I had been, waiting for this smackdown to be triggered by "the JP Morgue." Been waiting for a long time now. I was starting to think they couldn't pull it off, but I've been burned enough times to not underestimate their power. They're weakened, but they're not beaten just yet and they have a rich Uncle backing them up.

Seems to me the real story is that they were taken to the brink and HAD TO resort to extreme measures to keep from getting their head handed to them on their massive short position. That's fine. I think they're trapped. No way to cover their shorts at anywhere near these prices. All they're done is run the spec longs.

I can wait.

And now, we can trade some clownbucks for silver at a better rate. $22.50 would be sweet, but I've started to layer in long positions as of yesterday. The lower they push it, the more I buy. Geehaw.

Di, we'll see who laughs last. By the way, how much money have you made on your shorting campaign for the last coupla years? You never say. Nada? Silver's back to where it was in mid-march. It's just taken away the blowoff top so far. Ho hum. EZ come EZ go.

I'll see what you have to say at $60 and $80 and $140...if you're still around.

By all means, stay short till then.

May 6, 2011 | Unregistered Commenterfallingman

Ya'll remember what happened in 2008...Silver reached $21/oz...lots of people thought THIS was it, here we go...but silver quickly retraced back down to 9-12/oz and we had months of stocking-up at the low prices, yours truely bought 100's of ounces, even at premiums of $3-4/ I was ready for the $18/oz shackles to break free...and it did, in grand style...

This is just another HUGE buying opportunity coming upon us, all those who bought at $45-50/oz WILL recoup their losses...and when silver hits say $80/oz within 2 years won't remember the hight premiums they paid. They have the physical ounces...they'll do just fine, all you have to do is have faith, even if it takes a year or 2 to do it...Shorters will continue to resume eating their shorts.

Drive on and stay true to yourself and you will ne rewarded...

Snakeman Scott

May 6, 2011 | Unregistered Commentersnakeman

falling: i don't remember, was it 4 bucks or something like that? I win every day and I lose every day. sometimes more, sometimes less. what's your problem. I will be laughing, I promise.

snake: I am considering another wave can happen with gold going to 1800 (from around 1180 or like that), but the probability of that is 0.00000....1
not until july for sure. and btw, i think this time you guys (gold bulls) will be wrong big, and when I mean big, I mean like the Crude Oil chart, or worse, even no retracement like crude did from 32.50-s bottom to this week's high after the bubble popped


May 6, 2011 | Unregistered CommenterDi

No problem Di. You've just been on the losing side of one of the biggest bull markets in history, constantly getting stopped out...if you were smart enough to use stops.

I've made a small fortune...AND I'm positioned with lots of cash to re-enter.

How much have you made again? Or would that much have you lost?

You don't remember. That's rich. Some trader.

You've never actually traded anything in your life. Spare us the BS from now on.

May 6, 2011 | Unregistered Commenterfallingman

Interesting comments. However Silver Prices may now like to comment on whether the stocks will now start to rally better than the commodity. This would now seem a better bet in view of the increase in margin requirements. This seems to be supported with the action of experts like Eric Sprott.
Any comments ?

May 8, 2011 | Unregistered Commentersilver bug

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>