Out of Nov SLV puts, still bearish

As you know, I went short SLV via some Nov puts yesterday. This proved to be very timely, as silver did collapse from being up 4-5% to being down 3-4%! I took a very nice profit this morning, since I don’t want to risk SLV forming a base up here, leaving my Nov puts high and dry. However, longer term, SLV could be near a top.

Notice on the daily chart above that SLV had a MASSIVE reversal bar on record volume (by far)! However, given how obvious this reversal is, it may have one more rally to go (see wave count). This would once again squeeze the early bears, and reset bullish sentiment.

If we did get one more high, I would short it again. And even now I remain bearish silver medium-term. But because I had short term Nov puts, I decided to take my nice profits. I am still short via less-leveraged instruments.

Today is the day to short SLV

I’ve been waiting and watching for SLV’s typical blowoff move unfold. Today I took a short bet with it, buying Nov 27 Puts. This is obviously a short term play, but when parabolas reverse, the counter-move is usually very fast.

During a climax top, a stock leader that has risen for many months will suddenly take off and run up much faster than it has in any week since the start of its original move. On a weekly chart, the spread from the absolute low to the absolute high of the week in almost all examples will be wider than any price spread in any week so far.

- William O’Neil in The Successful Investor, pg. 80

Notice in the SLV weekly chart above that after rally for months on end, SLV has now blasted higher in a parabolic fashion. It is making it’s fastest gains of the entire move in the past two weeks.

On the daily chart, notice a few interesting features. First, about 5 days ago, SLV gapped way up and then rallied hard for three days. Then today, it gapped up once again. In O’neil’s book, chart after chart from the Nasdaq bubble shows this exact pattern, which indicates extreme bullishness that should reverse very soon.