Matthew Bradbard | Apr 14, 2013 01:19AM ET
The $26 level has acted as silver’s support for over two years now. And after a 10% slide over the past three weeks, including Friday’s 6% drop, we’re once again challenging this all-important line in the sand.
Will $26 hold this time? Maybe not… yet I remain a long-term silver bull and see lower prices as a buying opportunity.
It’s been a painstaking ride for silver buyers, my clients included. Fortunately, most outright long futures positions are hedged off with some sort of options exposure. It usually makes sense to sell calls or buy puts against at least a portion of large long positions. Silver is no exception.
Let’s take a look at sentiment, which has turned extremely negative.
If you haven’t guessed it – I fully subscribe to the theory of being a contrarian at sentiment extremes. As weak hands let go of their longs I will take silver off their hands and be a buyer with my clients.
Whether we’ve fully put in a bottom is not the point. We could easily fall through $26 before hitting rock. But I’m more concerned where prices will be in the coming months, not days. I expect prices closer to $32-34/ounce by Q3 and aim to use this two-year long setback as a buying opportunity within what I see as a longer-term bull market.
I recommend wading into bullish trade slowly and consider incorporating options hedges.
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