Friday, August 28, 2009

Silver Revisited

Silver gapped up after yesterday's accumulation action. Today we're seeing more accumulation in the area of 14.65-14.70. This does not necessarily mean we will go higher today, but you have to think about market makers and their desire to manage their inventory costs. The goal of the market maker is to average down the cost of inventory by buying from people with observable stop prices and selling to those who trade based on relative highs or changes in expectations (real or not). Silver has been accumulated yesterday in the 14.20 range and today in the 14.65 range with nearly 9 million shares traded today compared to about 5 million all day yesterday. This inventory is getting expensive and I'm guessing that we'll see this inventory start to get unloaded when silver makes a breakout above $15/ounce which would be considered a breakout from a converging, symmetrical triangle. Obviously this is all speculation, but I think it's important to observe clues the market makers are giving you about price action.

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