While I was away on Friday, precious metals & crude oil were both down sharply on the historically low-volume, day-after-Thanksgiving holiday trading session. While I’d imagine that some traders long USO pulled the plug on Friday as USO exceeded the lower-most suggested stop criteria, a 3:1 profit-to-stop ratio based upon the highest profit target of 33.82, I received several emails over the weekend inquiring about my thoughts on how to manage a position if still long or for those who bought into Friday’s selling. Keeping in mind that stops should be solely dependent on one’s unique risk tolerance, trading style & of course, entry price(s), following that high-volume, potentially capitulatory sell-off in crude oil it might be prudent to wait about 30-60 minutes after the open today, then place a stop slightly below the morning’s reaction low on USO. This would help mitigate any further downside losses while providing the potential to recapture some or all of the losses and possible go positive on the position, should Friday’s plunge in USO prove to be a flush-out.
Regarding silver, more specifically the SLV long trade setup posted last week, SLV has yet to trigger an entry on a break above the 16.05 resistance level. With that being said, for those already long SLV or considering entering/adding to a position here, a stop somewhat below the Nov 5th reaction low of 14.64 might be prudent. At this time SLV will remain a Long Trade setup with the same entry criteria (a break above 16.05) although an aggressive entry around Friday’s close of 14.83 with a stop below 14.64 might provide for a quick bounce trade or even a longer-term entry, should SLV go on to break above 16.05.
Friday also saw some technical damage inflicted to the chart of $GOLD (spot gold) and GLD (gold etf) with prices moving back below the recently regained 1180/114.50 support/resistance levels. As with silver, the next key support level would be the Nov 5th reaction low (109.67 GLD) with last week’s reaction high of 115.96 as the next key resistance level. To reiterate, Friday’s price action in gold, silver & oil clearly inflicted damage on the near-term & intermediate-term bullish case. Longer-term & less aggressive traders might consider standing aside and wait to see whether Friday’s drop in the PM’s & oil was just a one-day wonder or the kick-off of a new leg down. As I’m still catching up after returning from my trip, I will post some updated charts & additional commentary asap.