White Lightning

There used to be a graying tower alone on the sea
You became the light on the dark side of me
--Seal

There are two basic strategies when tradin' 'em. One is the fade trade, as in 'fading' or going opposite the prevailing trend. Buying fear and selling euphoria.

The other is the momentum trade, as in riding the mo-mo or going with the crowd. Running with the herd.

As a card carrying contrarian, I'm predisposed to fading. I like to be there for trend reversals. Jumping on board once price has already reversed and following the dominant trend is much harder for me.

Every now and then, however, I'll chase the train. Such a situation is occurring right now with silver.

I initiated a small SLV position in early August under $18. Since then, the price action has firmed and now sports a very strong technical pattern, with prices near 2008 highs.

The fundamental/macro backdrop is also strong. The spectre of more stimulus, quantitative easing, govt intervention (particularly in advance of the fall elections) increases the likelihood of currency destruction.

As conditions (thru my eyes) have become more favorable, I've been 'pyramiding' into SLV, meaning that I've been buying as price goes higher, and each purchase is for more shares than my previous position. Currently, my position is 4x the original 'starter' intiated in early Aug. If conditions remain favorable, I'm inclined to add more.

The risk is that the trend falls apart. Buying progressively more shares at higher prices means that I have less downside 'cushion' before losses kick in.

Currently, it's a risk I'm willing to take. I have a mental stop below in the $18.50-19 zone and upside eyes toward $25ish.

It should be mentioned that gold acts similarly. Am participating here as well but not in the same fashion as with White Lightning.

position in SLV, GLD