Staying the Course

I mentioned Thursday I thought silver was going to break out of this massive bull flag pattern. 

This is what it looks like today.

I am beginning to sense the urge from some traders to sabotage good positions we have in our stocks and metals portfolio.  The fight or flea instincts in us is strong.  So is recency bias.  What makes humans different from other creatures is that we have the ability to overcome these tendencies through practice and self-discipline.  Most traders don't realize they are making bad decisions at the moment, but they tend to make them over and over and over.   This is why cycles work.  They reflect human flaws in our trading.  This is what creates patterns.  My role here is to try to keep you in winning positions to maximise the potential of a cycle while you are battling your instincts.

Occasionally, these cycles become disrupted, but the disruption itself is part of a pattern that repeats.  I posted this chart on Whatsapp yesterday of a disruption called the short squeeze which happens over and over and over.  

The short squeeze is simply the function of a market when price begins moving against short traders.  At first, the big boys decide that they have pushed price as low as they can and decide that they could take their gains and invest them elsewhere that has more profit potential.  This is not like the stock market where you just exit your position.  You don't sell to get out.  If you are short you have to buy your way out so they buy.  This triggers the next wave of buying which is stops getting triggered.  Just like we do with our long trades, many short traders use protective stops and when those hit it triggers more buying.  The next wave of buying happens when astute traders realize there is buying happening and they decide they want to be long, so they start buying.  Then you have your trapped short traders who are being hammered by margin calls who are running out of money and they are willing to buy at any price to get out of their short trades.  They felt the squeeze.

Then there is us.....the dumb money traders who sat on the sidelines when the buying was good and start thinking..." Maybe I will buy me some silver".  At this point, who do you think is willing to sell this group of traders their silver?  The shrewd traders who bought at the bottom.  They will be more than willing to sell us all their shares at the top and we will be enthusiastic when we buy them.  If we feel comfortable when we buy it is already too late.

The measuring target for the bull flag is around the $20.50 mark.  This move will be very close to the 2016 high.  This move is powerful enough to get there in another 4-6 weeks.  ​

This move will NOT be a straight line.  I think we could see even more volatility than we have seen.  This is done by the market makers who see an easy way to steel the positions of frightened traders.  I will be pushing stops above the entry price of most in our group very soon, but I will be recommending lose stops for a while.  Once the stop moves above 19 I may begin tightening somewhat.  If you have multiple positions I can make some positions tighter while keeping some positions looser.  Exiting will be an individual decision for the most part but if we hit $20 I will have the stops very tight.

One other pattern most of us are beginning to recognize is that the bullion bankers are determined to keep the price of gold in check.  WE should be expecting a hit maybe Sunday night or around 9:00 Monday morning.  If/When this happens we do not need to be doing anything except sitting on our hands.  It is not a change in trend.  It is not an end of the rally.  If you do anything at all you should be thinking of this as a dip to buy.  

​Have a great weekend!