- Silver has been very noisy during the trading session here on Tuesday. Yet again we continue to see a lot of questions asked about the market in general.
- With that being said, I am a bit cautious at this point and I recognize that we might be getting a little overstretched and if that's going to be the case, I would anticipate some type of significant pullback.
Silver can be very brutal at times, so you have to be very cautious about becoming overexposed. Something that is very easily done in an environment where leverage is so high. Keep in mind the silver contract is much bigger than the gold contract, so you can really get hurt if you are on the wrong side of the trade. With that being said, I like the idea of buying pullbacks, and I think the $31 level should continue to be support based on action over the last couple of days, but if we were to give that up, then I would look at the psychologically important $30 level as your next entry.
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The RSI is Overbought
The RSI is well above the 70 level and that of course shows signs of being overbought. And with that, I do think a correction is not only likely, but probably needed. Silver does have a long history of having these major short squeezes, though, because it's a paper market. There isn't as much silver in the world as there is traded in the market.
So, if somebody gets too cute and starts demanding silver, it could bring the whole thing down. They try this every once in a while. Whether or not it lasts remains to be seen. I mean, after all, a lot of banks will come in and just short it. JP Morgan has been busted multiple times for manipulating the paper market, so it generally is a short lived phenomenon.
But that doesn't mean you can't make a lot of money. Obviously, you can. You just have to be correct. If we break above the $32.50 level, that will mark the next leg higher. But again, I think the biggest problem you have is keeping your leverage under control because this will be very volatile on the way up.
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