Silver: The Balloon Underwater

Updated: May 30

Welcome to June, and with the markets feeling "frothier than ever," things are about to get "Frothier". There was another big rotation out of Bitcoin, leaving it with its worst month since November 2018, while the smaller "MEME" stocks were the target of another short-squeeze.

Since February (the last short squeeze attempt), the Gold/Silver ratio is rangebound from about 63:1 on up to 70:1. The four months of rangebound consolidation have been frustrating for both the bulls and the bears. However, constrained supplies, explosive demand in conjunction with aggressive fiscal and monetary policies have created another reason to consider applying another layer of calculated risks call spreads in Silver. We choose to use the Futures and Commodity markets as our investment vehicle due to the near 24-hour access, leverage, and liquidity. The last silver squeeze happened on a Sunday night, leaving little opportunity for the equities investors or the physical investors a chance to unload. To further help you understand the quantitative analyses of the precious metals markets, we created a free "Gold Trends Macro Book," which has been updated with silver slides. You can request yours here: Free Gold Trends Macro Book.

Weekly Silver Chart

Looking at the recent technicals, Gold has done a fantastic job breaking out of the "Bullish Pennant" while testing the apex of the pennant and closing the week above $1900. Once the breakout becomes noticed on mainstream financial media outlets, short-term silver tourist investors will most likely flood in looking for a cheaper way to try and take advantage of the rally in Gold. That is why we are prepositioning again for a potential move. An example of our strategy will be combining purchasing a Comex Silver Call while selling a higher Silver Call to create a "bull call spread." As of this writing, September Silver futures are trading at $28.00/ oz. The trade we will be building will have a calculated risk max loss of $3,250 with a maximum profit potential of $16,750. If you would like to learn more about the strategies we are implementing or learn more about technical analysis, we created a guide to provide you with all the 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 Gold.

Good luck and good trading,

Phillip Streible

Chief Market Strategist


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Futures trading involves 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.

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