When Silver Cracks: Start Scaling Bullish

Silver happens to be one of my favorite commodities to trade but it's not for the faint of heart. Early in my career a very successful commodity trader told me that silver takes the escalator up and the elevator down. Translation: When silver cracks it can be a big move in a hurry as seen in last week’s action. In the last six sessions, silver has been down every day, dropping roughly 11%. In dollar terms that represents almost $19,000 per future contracts. On ,oves like that, fortunes can be made and lost, so make sure you know what you're doing or deal with a professional if swimming in these waters.

Tactics
My objective has been reached as I’ve been saying a trade under $30 bearish trades should be taken off and with a 61.8% Fibonacci retracement completed, Thursday, that is good enough for me. If you notice, I point out that we filled the gap from 8/22 mentioned in previous posts. My stance now is aggressive traders should reverse and start scaling into bullish trade. At current levels I suggest buying 1/3 of the ultimate position you want to own. Lightly start scaling into futures or call options on the upside. I will be suggesting various strategies depending on clients account size and risk tolerance. Use the Fibonacci numbers on the upside on the chart above as your target. At a minimum into early 2013 I think we can trade back near $32/ounce. The chart above is for March options and I suggest May or even July contracts depending on the strategy.