Thursday, April 28, 2011

Silver is extremely overbought

Click on image to enlarge

I am not selling my silver bullion yet but so many people are on one side of the canoe (well over 90% of traders are bullish on silver) that my expectation is that we will see a pullback at least to near the 200dma which is down around $30 per ounce. I am going to play this by buying shares of the Proshares Ultra Short Silver ETF (ZSL). This ETF will go up in price if the silver price goes down. In fact (ZLS) will go up or down 2x the move of the silver price. So if silver goes down 5% (ZLS) will go up 10%. Of course silver could keep going up but it has now tried to unsuccessfully bust through and hold above $50 twice without success which is not a good sign. Do not get me wrong, eventually I see silver trading for well over $100 per ounce just not on this run.

1 comment:

Luis said...

You were right. I hope you jumped in to ZSL when you said you would. I got lucky to ride the wave up and now i'm riding it down.

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