Since spiking to almost $50 an ounce in April 2011, silver has been in a gradual decline, with the metal putting in a series of lower highs over the last two years.

Meanwhile, the low on each of the big dips has been contained near the $26.15 level, hitting the price three times in the last two years.

During the recent pullback from $35 an ounce to $29, large speculators have been lightening up on their bullish bets.

Last Friday’s Commitment Of Traders (COT) report shows that the group is net long 18,603 contracts. This is the first time since last August that the net long position has dropped below 20,000 contracts.

Last summer, the price moved sideways for just over a month before it took off on a rally from $27.50 to $35 an ounce. The 27 percent move only took eight weeks.

With silver trading right around $29 an ounce right now, I will be watching the COT report to see if large speculators start adding long positions.

The long positions started increasing right before the rally started last summer. The other item to watch is the price. If I see the price down near the $26.15 level again, the upside reward will far outweigh the downside risk at that point.