Not watching the markets as actively as I usually do felt strange this week. One of the few things I did watch, and the only thing I actively traded, was the bounce in silver. By Tuesday afternoon I realized that the SLV had a chance to regain the 35.75 level, which I viewed as a fairly important longer term level – I was, and am a long term silver bull. The plan was to go long silver (via the AGQ) if SLV broke the level. I knew I would likely have to hold the trade overnight because it was unlikely to go too much higher in Tuesdays session. With the dollar weakening (I use the UUP as an intraday dollar indicator because I can see volumes there) I liked the risk reward and triggered in the last hour of Tuesday buying AGQ June 190’s. After watching silver open the next day and trend up in the morning, I knew the bounce in silver – dead cat or not – could last much longer. I wanted to be greedy, instead I offered out the calls.
The second trade was on Thursday. After silver had gapped lower I noticed an inverted HS pattern forming on the 5 minute chart. I also included a 3 minute chart because the pattern is much clearer.
I ended up trying to trade this pattern again with the AQG 190s that had worked so well before. I ended up selling half the position on the second test of the 78 period moving average (on the 5 minute this is 1 day) when SLV broke above it failed to become support. I still felt that silver had put in the low of its daily range so kept the other half until the second white arrow. I exited because price was churning sideways, the intraday uptrend clearly broken.
However this was not a successful trade because the calls did not increase in price as rapidly as the AGQ and the spread was wide so it was difficult to get good fills. What could have been a 4 point intraday move was instead a break-even (after commissions). However, capital was preserved, next time I will use shares, and a valuable lesson was learned.