Commercial producers of silver
are rarely wrong, in fact, of the last 19 times their net short position rose to their highest point in 21 periods, 18 times resulted in a pullback for an average of an 11% decline. They are not always right, but going back to 2010, they've called the direction of silver
18 times. This should get you noticing that they have once again accumulated a massive net short position. This time nearly 7% off the most recent highs. Historically this has produced significant moves to the downside, lasting an average of 3.6 weeks (we just completed week 1). The top end risk is the 7.6% I mentioned before, but logically the top end risk is closer to 5% given the high of last weeks candle at 15.56. The target range is at least 11% away at 13.13, but could go much lower given the level of short positions has climbed to +70K, normally 50K is a good selling point. They are massively short at these prices. I'll go with the commercial producers who, I assume, know more about silver
than I and take this trade in the option markets. I'll be buying at the money puts expiring in late March on the SLV
because I don't trade the FXCM
. I expect this trade to last about a month, closing out positions as they double in value and will re-evaluate on any significant changes. I fully expect a move to 13/oz, but will take profits off the table as I have them.
(See notes on chart)
And as always,