I am becoming very constructive on the Silver charts — it must be time to go short
- Posted by PeterLBrandt
- on January 25th, 2012
Silver bulls love it when I am bearish because I can be the subject of their venom. And for the most part I have thought prices were headed lower ever since late April.
But the charts are now telling a quite interesting story that, if true, would have an amazing conclusion.
The monthly chart below shows the price of Comex Silver back to 1993. The most interesting feature of this chart is the Commitment of Traders data at the bottom. The thick lower line tracks the net position of commercials — both producers and users. The thin upper line tracks the net position of large speculators and funds.
Of interest is the fact commercials have the smallest short position since the 2001 low at $4.50. Typically commercial traders are the group to follow, especially at COT extremes such as we are currently experiencing.
The composition of open interest presently is the most constructive it has been since the late 2001 bottom. In fact, the profile of the open interest helps explain the sharp price advance of the past week.
The weekly chart displays a possible “bull” channel from the April 29 low. I have listed on this chart three price levels that will need to be breached before we can seriously talk about the continuation of the major bull trend in this market.
The combination of the channel and the COT data should be encouraging to all Silver bulls. The first classical chart pattern that would support a strong advance is the possible 4-week double bottom, requiring a close above the last Oct high.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Peter Brandt entered the commodity trading business in 1976 with ContiCommodity Services, a division of Continental Grain Company. From his start in the commodity industry, Peter's goal was to trade proprietary funds. But, he first needed to learn the business. More »