Please visit our Premium Research section for daily actionable analysis, including updated fundamentals, technicals, actionable bias, and proprietary tradable levels.
This past week has been fast-moving for the Global markets and policymakers. Expectations are moving from a 50 BPS rate hike in March to stress testing banks, and the increasing odds of a rate cut have been a quick reality check for demand-driven commodities such as Copper, Crude Oil, and Palladium. Volatility, Systematic risks, and contagion fears are three themes on everyone's radar. The turmoil in the banking sector triggered a flight to safety as the funds were caught off guard with a small net long Gold position and a significant net short position in Silver.
Too much of our benefit as Precious Metals bulls, the funds then had to flee risk assets and duck for cover in safe-haven vehicles such as the U.S. Dollar, Treasuries, Gold, and Silver.
Daily Silver Chart
The technical backdrop in Silver shows the first level of support just below the recent swing low of $21.50/oz. We suggest using that level for "stop-loss" protection for clients currently long Silver. Looking at the stochastics, they have pushed into "overbought" territory indicating that the current bull market is alive and well. The technical chart pattern suggests that Silver is in the midst of a "Bull flag pattern" and could extend back to the $23-$25 consolidation range, as we saw from December through February. To further help you develop a trading plan, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold that can easily apply to Silver." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Silver.
Daily Gold Chart
The technical backdrop in Gold shows a crucial double bottom at $1811/oz, and the market is well above the 200 DMA at $1785/oz. Stochastics are rising into overbought territory, and DMI+ is crossing back over DMI- indicating a healthy bull market. If the April Gold contract can close above $1965/oz, it should ignite the bulls and rally back to 2000. We find value in Gold back near the 1880-1910 zone.
The near-term and long-term macroeconomic backdrop remains on thin ice as the markets continue questioning the Fed's ability to get inflation under control through aggressive rate hikes. On Wednesday, March 22, we have the next FOMC meeting.
We see value in systematically purchasing regular intervals of the 10-ounce Gold contract or 1000-ounce Silver contract. You can layer in over time and preposition for the next rally. One example with a $25,000 account size would be to focus on the December 2023 10-ounce Gold contract and use a dollar-cost average approach by purchasing 10 ounces of Gold at 1850/oz, 10 oz at 1800, and 10 oz at 1750 with a year-end target of $2100/oz.
If filled on all three contracts, your average price will be $1800/oz; therefore, every dollar move Gold makes on the three contracts will be $30 since you control 30 ounces. If the $2100/oz price objective is achieved by year-end, this will result in a gain of approximately $9,000 (30 oz times $300 rise). Traders should also consider proper risk management using a dollar-cost averaging approach, such as a hard stop on three contracts at $1700. If that were to occur under this scenario, it would likely result in a loss of $3,000. If you have never traded futures or commodities or would like to learn more about taking delivery of Silver, I just completed a new educational guide that answers all your questions on transferring your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. You can request yours here: Trade Metals, Transition your Experience Book.
Sign up for a 14-day, no-obligation free trial of our proprietary research with actionable ideas!
Free Trial Subscribe to our YouTube Channel
Email [email protected] or call 312-278-0500 with any questions -- our trade desk is here to help with anything on the board!
Futures trading involves a substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Like this post? Share it below: