It is incredible what an army of people can do with one common goal, and there is wide speculation that this army could create a short squeeze in silver, so stay tuned; this could get fun, states Phillip Streible of Blue Line Futures.
One of the most common themes I heard is that individuals feel left in the dark about playing the metals market, so what I wanted to do this week is give you an inside look at the note we put out on metals.
Silver (March)
Gold: Settled at 1841.2, down 7.7
Silver: Settled at 25.922, up 0.533
Fundamentals: For one second, forget the headlines: Gold and silver are higher with the equity market lower, THEY ARE ACTING LIKE SAFE HAVENS! We have been waiting for this divergence for nearly a year when the metals complex got crushed due to deflationary fears at the onset of the pandemic and Saudi Arabia's production decision. Now, we of course, cannot ignore the headlines, and we could be witnessing the start of the most coordinated short squeeze ever seen in commodities. The WallStreetBets Reddit forum, famed for GameStop (GME), AMC Entertainment Holdings (AMC), and pushing hedge funds into liquidation, is now targeting silver through ETF options.
We do not like using ETFs because it is a derivative of a derivative, and you are losing value relative to using futures on the CME (the underlying of the ETF). However, when iShares Silver Trust (SLV) rises, the ETF manager must correlate buying in the futures market. If there is a squeeze in SLV, primarily through options, there is room for this market to rip higher. Furthermore, if people catch onto the futures options, we use and create large open interest in call options that then moves “In the Money” this would create a generational short squeeze. Silver futures are physically deliverable, and there could be more options in the money than could cover what is available for physical delivery; the only remedy would be higher prices.
Technicals: We remain outright bullish in bias as gold and silver are roaring higher. First, silver failed at major three-star resistance yesterday at 27.00-27.28 and has now cleared that level; continued action out above here ultimately paints a path of least resistance to 30.00. This round $30 mark will likely be pivotal due to the aforementioned option narrative and a move through here could spark that massive short squeeze. For gold, it is now out above major three-star resistance, a level it has not been able to clear upon multiple tests. Continued action above 1862-1866.5 paints a path of least resistance to 1855.1-1900.
Bias: Bullish
Gold (April)
Resistance: 1873-1875.9**, 1881**, 1895.1-1900****
Pivot: 1862-1866.5***
Support: 1850**, 1843**, 1829.9-1831***
Silver (March)
Resistance: 27.00-27.28***, 27.83-28.02**, 29.38**, 30.00***
Pivot: 26.50
Support: 25.99-26.07***, 25.03-25.15**, 24.71****
Learn more about Phillip Streible at Blue Line Futures.
