Just a quick note to let you know our thoughts on today’s sharp rally in the precious metals sector, especially in silver. The white metal even pierced through our initial upside target level, so the question is if profits should be taken off the table. In our opinion, this is not the case. In fact, we are considering doubling the size of the long position at this time, but prefer to wait for the markets to close before making such a decision.

Silver finally broke above the 20-day moving average and while we don’t think that implies that silver will rally for dollars from here, we think that it will move at least somewhat higher (as it was in the previous cases of breakouts above this line). The post-breakout rallies were short-lived, but took silver quite visibly higher on a temporary basis and that’s what we want to take advantage of here.

We probably wouldn’t be writing the above if it wasn’t for the strength in mining stocks that we are (finally) seeing today. Miners are rallying which is bullish (and will be much more bullish if they close today’s session without an intra-day decline) but they are still relatively far from our target area - thus, it seems that this rally has further to go.

Consequently, we are not taking profits off the table, but we are not increasing the size of the long position just yet (we might do so after today’s close, but it’s too early to say for now).

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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