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Flipping the Silver Switch for a Trade


Probing the other side of margin calls.

"War, children, it's just a shot away, it's just a shot away." --Rolling Stones

As chronicled in real-time, I've had a love-hate relationship with silver and its proxies over the past few weeks and quite honestly, at times I've felt like I've been on the receiving end of a query from Stork in Animal House; for those who don't have the time to click on that link for a quick smile, I'll decipher -- there have been times I've felt like an absolute moron.

Welcome to world's wildest reality show, where if you can't handle feeling silly at times, you're hanging your hat in the wrong house. Nobody -- and I mean nobody -- top or bottom-ticks a stock or sector on a consistent basis, and anyone who says they do is not to be trusted. In fact, one of the oldest axioms on the Street is "you make money between the twenties." In other words, leave the red zone (market cusps) trades to others and play the trend after it turns.

I'll be frank (Hi, I'm Frank!), this is one "rule" that I've never been very good at following. It's not an ego thing as I'm not trying to "call" anything or play the attention-grabbing headline game. In fact, I went out of my way to side-step a congratulatory back-slap yesterday for fear of retribution from the Trading Gods. If you don't stay humble in this business, the market will do it for you.

I'm nothing if not consistent, and my tendency to enter trades early (hand raised!) and prematurely evacuate (other hand sheepishly raised!) remains in tact. In fact, as shared on yesterday's Buzz, I took an upside stab in this frisky commodity home for the night and entered today's session long silver, and with corks on my forks.

Two quick thoughts: First, silver has been trading as if "trapped longs" drank a wee bit too much Kool-Aid into the parabolic frolic. Given the margin calls (that's how it acted into yesterday's close), we must remember that it's tough to time that invisible catalysts. Second, IF silver was to close higher today, it needed to open in the hole, which it has obviously done.

I'm not rationalizing risk -- I was short this puppy into $50 for a reason -- I'm simply playing a fade trade the other way given the 25% backhand slap in six sessions, without getting too cute... if that's possible. I bought a bit more on the opening (-4%) for a trade, and will operate with defined risk, as chronicled in real-time on the Buzz.

Again, we trade the market we have, not the one we want.

As for the broader tape? You know the drill; heck, everyone knows the drill by now. S&P 1340 is the level of lore for traders galore and there are sell-stops on the other side of that ride. Please remember, technical analysis works until it doesn't, so assimilate (all metrics) rather than defer blindly to any given one. The tone, tenor, and tea leaves will be important, as will the field position (remember from where we came).

We will, of course, walk that walk together.

Some Random Thoughts

  • Good traders know how to make money but great traders know how to take a loss.

  • I've long wondered whether traders follow technical analysis because it works or if it works because traders follow it. At the end of the day, it really doesn't matter. As I've said, if watching the grass grow helped demystify the market, I'd be on all fours in the back yard (again)!

  • Seeing old friends is good for the soul.

  • Have we arrived at the point where an inability of the commodities to bounce would serve as a precursor to a failed equity rally attempt? (I believe so.)

  • If silver rallies back to $50, will this be the fastest Bull-Bear-Bull market in history?

  • If I were to "pull back the curtain" and talk about the endeavors of a small business owner in real-time -- the struggles, successes and sacrifices -- do you think there would be an online appetite?

  • When is the last time you smiled so hard that your face hurt?

  • Nose-scrunching action yesterday? Apple (AAPL), Google (GOOG), and the semis, led by Novellus (NVLS) traded dry all day. Sometimes you can learn a lot just by watching.

  • Goldman (GS) $150 is a level of lore. Watch this stock at that level, as the rest of the world will be as well.

  • What kinda kitten eats a shattered light bulb? Blue, that's who, and he'd be in trouble if he wasn't so darn adorable. And yes, I'm man enough to admit that I'm a cat lover. What's it to ya?

  • Lemme get this to you. Have a great day Minyans and remember that profitability begins within.

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Position in silver.
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