Time to take a flier on Silver?

A couple days ago, I bought some call options on SLV (well in the money and a couple months out, as I generally prefer).  SLV was testing a level that had provided support twice in the last year.  So far support has held for a third time.  Previous to that, 18-ish had been resistance.  With today’s rally, a noticeable (but not entirely convincing) bullish wick is in place on the weekly chart.

2014-05-02-SLV_CHARTS

It feels like 18-ish could be retested next week, but this is an interesting place to take a flier.  What makes the situation even more interesting is the bigger picture cross-current configurations in the metal markets.

On one hand, I have been open in my bearish view of copper.  And Silver and copper have very similar-looking bearish multi-year descending triangle chart patterns!  So why am I bearish on copper and bullish on silver?  Good question, and part of the answer is simply: as a hedge.  But the more nuanced answer is that copper has already badly broken support.  Silver has not.  Copper is testing to confirm the breakdown.  Silver is still testing (and holding at) support.  My interest in silver is also tied to my bullish read on the inverse head-and-shoulder patterns in GDXJ and GDX.  With silver and gold so beaten down, yet holding above support, and with miners flashing a very bullish chart configuration, it seems like a decent time to gamble on a rally.

 

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