Silverquotes have come back down to earth with a thud, so perhaps it’s time to review our outlook, which was, and still is, quite bullish for both the intermediate and long-term. The Comex July contract has shed a hefty 10 percent of its value since Tuesday, settling at 17.51 yesterday after peaking just two days earlier at 18.89. Although this has caused some gnashing of teeth and sporadic expressions of anguish in the Rick’s Picks chat room, long-term bullion players who frequent the room seem to be taking the move in stride.
We ourselves sounded an especially bullish note a week ago when we wrote that it would be a “piece of cake” for Comex silver futures to push above some daunting reservoirs of supply on the intraday charts. The June contract duly obliged shortly thereafter, but as you can see in the May futures chart below, the rally left one key high at 18.91 recorded in January undisturbed. Although climactic buying missed exceeding that peak by just 2.5 cents, it was enough to make any selloff that followed a possible threat to the short-term picture.
Six Weeks of Purgatory
In the meantime, we’ll view the futures as being in purgatory, tasked with consolidating for the expected push within six weeks or less to 21.53. Our position in silver at the moment consists of 800 shares of Silver Wheaton stock with a cost basis of 11.75. We have been doing covered writes against the stock to further reduce its cost basis and, in line with this strategy, are short eight May 18 calls for 0.64. If you’d like to tune in to Rick’s Picks daily analysis and predictions, you can sign up for my newsletter and receive one of my forecasts free each day; or consider taking a risk-free trial of the full service, which includes all of my forecasts and access to my chat room.
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