On May 5th during the craziness of the silver decline on this blog Scott posted charts to provide a roadmap for traders to potentially cover shorts (if you hadn’t already) and look for a bounce type trade set up. As you can see on the chart this area was $33.50-35.25, and silver hit an intraday low of $33.58.
Silver is now in bounce mode. The same way you needed to have levels of support outlined, now you need to measure where this bounce can go. It seems an easy area to bounce would be back the 50-day and gap fill of $37.80-38. If that happens, then resistance number 2 would be $41-41.50 where it will have the curling-down moving averages to contend with.
Expect the unexpected here, as this trade has been a difficult to handle. Make sure to use a tier system to lock in profits on the long side (if you bought into the outlined support) then if you start shorting- make sure to give room in case they take it further than expected.
Disclosure: Long SLV
By: Marc Sperling