Thursday, November 05, 2009

Emini Futures Trading - Page Trader Silver Forecast / Thursday November 5th, 2009


On today's show we discuss a Silver Forecast made by Page Trader in May of 2001.

May 2001

For the first time since I began trading in 1990, silver is in an important bullish position. This position is composed of several  factors:

  1. Approximately 20 years ago, the silver market was cornered by the Hunt brothers. Corners are not random events. A successful corner occurs only after the expiration of critical time/price cycles.
  2. There are 2 important prices in silver connected with both the 20th year, and the year 2001; these are 4.24, and more importantly, 3.86 per ounce.
  3. Silver declined to 4.27 in March and April 2001 (monthly chart), within 3 cents of 4.24.

I believe the recent swing down to 4.27 is a significant early confirmation of large time cycles culminating. The chance to own silver at 4.24 or lower may be gone already. But because the time element is large (yearly), and ½ of year 2001 remains, there still is ample opportunity. Here is my plan: 

1.  BUY:  I intend on buying silver futures at or around 3.86 per ounce, and taking delivery of the metal through warehouse receipt.  SELL: Any monthly close below 3.69 per ounce and I will return the silver to market.

2. BUY: If year 2001 closes above 4.24 without having touched 3.86, I will buy silver at or around 4.24 per ounce and take delivery. SELL: Any monthly close below 4.14 per ounce, and I will return the silver to market. 

3. Silver is now at 4.56 per ounce. You will receive an update on any decline to 4.24 prior to end of 2001. 

This is a long-term, multi year buy/hold position. We are buying at or around critical low levels, which may not be seen again for many years after an advance starts. Often, an important advance begins with prices immediately at  (apparently) high levels, making a commitment difficult then. That judgment is often wrong, as prices can go much higher when the time cycle indicates it. Owning silver at 4.24 or 3.86 places us already in the market when the surprise advance begins at “high” prices. I believe the potential upside in silver is extraordinary and worth serious consideration. 

It is important to trade with known, meaningful risk and exit when that risk is exceeded. This is true when buying the actual underlying commodity, as we plan to here, as well as futures. The risk outlined above is reasonable, more important, it is not arbitrary; it is based upon numbers which I am satisfied are important in silver. There are people who, after silver hit $50.00 an ounce in 1980, felt it was a bargain at $38.00. Others bought the metal at $25.00 per ounce, figuring ½ the high a great price. Because they were hopeful about future gains, and owned the actual metal, they could hold silver as long as necessary to await their profits. When silver continued to decline, they never took positions off with a reasonable loss. Now, 2 decades later, there is still $25.00 per ounce silver being held by the original buyers, or their relatives. Losers try to never take a loss, even a reasonable one. The same is true now, 20 years later. If we buy at 3.86 and the monthly closes below 3.69, we will exit with a reasonable loss because silver can go much lower and can stay lower for many years.

"Nice Call David!"

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