I've been pretty bearish on Silver (a metal I am allergic to and despise), and Monday I got my face ripped off.
The chart below looked rather bearish to me especially with that possible head and shoulders that had been forming since September, many indicators also showed nice divergence on the daily chart. I opened a short position last week feeling pretty good about it.
The one thing that made me a little uncomfortable was the volume. Look at that spike in volume during the rally of the right shoulder. I should have paid more attention to it since it plays such an important part in the formation. I see possible H&S formations all the time in charts, rarely do any work out without volume confirming the formation. That high volume rally forming the right shoulder should have been a warning that this probably won’t pan out as head and shoulders formation. Stupid me…
My contact-dermatitis, which had been working *for me* the past couple of months as a leading indicator, was off the scale when I saw silver prices Monday morning. (Doctors tell me this is more of a psychological thing since I have no physical silver in the house) Someone here told me I should not use allergies as a tool to trade with and I now agree, especially since my allergic breakout was psychological and that alone could get me killed if I don't have emotions under control. I also think that with all the fancy oscillators and indicators available, basic chart patterns and volume should never be neglected.
I got out of my Silver shorts Tuesday morning when silver took a "breather", and already my itching has stopped and the rash has started to clear up. I still think that Silver has a nice correction coming, but did not want to add to the position. I don't like adding to this kind of a trade, and precious metals are too goofy for me at these levels. I think I'll see a much better opportunity for shorts elsewhere soon; I'll deal with silver later.
