Gold and silver has been running very hot in the past month and metals is one of the most promising areas of the market.
Gold has been making new all-time highs and silver has been following suit in the strength of gold.
However, silver has not broken out of its multi-year resistance levels and will be testing them soon.
And on the daily chart, silver has reached >70 daily RSI. Based on a little backtest of silver for the past 3 years, 83% of the time silver crashes back down swiftly when it gets close to 70 daily RSI.
Along with natural gas and the VIX, silver's price is well known to have a "pump and dump" type of chart pattern.
Although this silver-short trade has not been systematized and officially documented yet, it sure seems like a very good trading opportunity as a speculation.
My Trade:
My personal trade for silver is through SLV puts that expire in 2 weeks.
Silver has been stronger than I anticipated and kept making new highs. Currently at the time of this writing, my trade is slightly negative. I double down on the size of this trade (originally just going to use $500 worth) to give it a better chance to recover. In 2 weeks, I shall find out if doubling down and using put options was the right decision over simply owning a leveraged inverse silver ETN. I hope some of you find this little analysis insightful. Happy Trading! Leo Q.