Feb 28th 2020, Silver Chartbook – The weakest link

The weakest link

The weakest link is you. That is not always easy to admit, but it is factual, that the main cause for large draw downs is human error. The list of errors in market participation is long. For example running stops or sitting frozen behind the monitor not being able to push the button. Last week´s price action in the precious metal sector and overall world markets was very much influenced by the news regarding the coronavirus. A whole new dimension of emotions comes into play when financial volatility is governed not only by the thought of of loss of financial security, but by possibly fearing for your own health.

With a possible coronavirus pandemic it is certainly understandable that emotional business isn’t as usual. Unfortunately this is not helpful for proper execution requirements. Our quad exit strategy fortunately takes partially care of a situation like this. What else can be done to protect the weakest link.

Most likely this news item will be on the forefront for a while and as such can shake even the strongest person´s confidence. Emotional reactionary behavior in the market is the least conducive to a prosper outcome. Taking some time out and finding a quiet space to write out a detailed execution plan for various anticipated backup plan scenarios is the most helpful. If unwanted emotions are already in place, a successful remedy is to simply lighten up on short term trading exposure. Less risk equals less sleepless nights. No need to deviate from well established long term wealth preservation plans.

Silver Monthly Chart – Reversal Pattern:

Silver in US Dollar, monthly chart as of February 28th, 2020

Silver in US Dollar, monthly chart as of February 28th, 2020

The monthly chart of silver shows that prices have been rejected by the US$18.40 to US$19.00 distribution zone (red horizontal box). The yellow circle points out a reversal pattern (pincer/tweezer candle stick chart pattern). These would be factors that speak for the short side.

Trading at the mean (red dotted line) represents a neutral stands.

Triple moving average support, in this case simple moving averages with settings 20 (yellow), 40 (turquoise) and 200 (magenta) are an argument for the long side.

Let us not forget this being a pure technical picture of events but markets being driven very much fundamentally by recent news events.

 



 

Silver Daily Chart – At Neutral:

Silver in US Dollar, daily chart as of February 28th, 2020

Silver in US Dollar, daily chart as of February 28th, 2020

A rightfully concerned market was reflective of last week´s news in its price behavior. Overhead resistance in the silver market and extended gains in gold were additional factors to keep price advances not just in check but caused a quick sell off. The daily chart above shows prices trading at a supply/demand zone (green horizontal box). Although being a neutral zone further negative news items can easily drive prices lower.

If trading positions make you feel uneasy always allow yourself an out. One of the best ones is the fact, that one can always reenter a position. One should never feel trapped within ones holdings. We post frequently low risk reentry points in our telegram channel .

The weakest link

It is never beneficial to worry since emotions like that more often than not lead to unwanted results. However, this is easier said than done. The fight flight response (fear) reduces our cognitive functionality. Having rehearsed,  just like professional athletes do for competition, various possible outcomes of price behavior in the markets, allow for fear to be in check. Surprises causing this emotion are less likely to arise. And as such with a written action plan one can execute trades in a more emotionally calm state.

We post real time entries and exits for the silver market in our telegram channel. Follow us in our telegram channel.

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About the Author:

Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent.Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.

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