Buy Alert: August 8, 2013

| August 8, 2013

Buy Alert: August 8, 2013


Option Strategy:

Buy iShares Silver Trust (SLV) October 2013 $19.50 calls for $1.10 or better.


Commodity Outlook:

Buyers are rushing into silver this morning…

The severely beaten metal is quickly breaking back above $20 as I write. 

As you know, $20 is a very important technical level for silver bulls.  The fact there is so much buying interest at this level today is very telling.

What’s sending silver higher this morning?

Chinese import data for July came in much better than expected last night at 10.9%. The consensus estimate for this reading was a mere 4%. That means the Chinese economy is holding together much better than economists realize.

And since China is the biggest buyer of precious/industrial metals on the planet, gold, silver, platinum, copper, and palladium are flying this morning.

However, the real question here is…

Will silver continue higher from here?  Or is this just another one-day wonder rally that will ultimately fail?

Let’s look to this chart for an answer…


As you can see, with silver trading firmly above $20 an ounce this morning, it has broken a major downtrend line.  All we need to see is silver hold above this important technical level at $20 in coming days and we’ll likely see further upside.

We’re using the iShares Silver Trust (SLV) to get long the silver market.  As you know, when the price of silver rises- so does the SLV.

Here are the important details you’ll need for this trade…


Trade Metrics:

Underlying ETF Symbol: SLV
Call or Put: CALL
Expiration Month, Day, Year: October 18h, 2013
Strike Price: $19.50
Current Bid/Ask Price: $0.95/$0.96
Maximum Buy Up To Price: $1.10
Maximum Risk Per Contract: $110

Here’s a breakdown of the important technical support and resistance zones in silver…



Exit Strategy:

Remember, we want the price of silver to move higher.  Our first profit target is $22 an ounce.  If the metal can break through that important level, we may see it retest $24.

The risk control line is at $19.00 an ounce.  If silver drops below that level, it represents a failure of today’s technical breakout. Conservative investors should consider closing this trade if silver trades under $19.00.

Like our put trade with oil (which is working great today by the way), we’re giving ourselves plenty of time with this trade.  The expiration month is October.


Category: Commodity Trading