Tuesday, April 26, 2011

Silver Road Map

We’ve been talking about shorting the silver top (and alluded to wanting 50 reversal on weekend) now in one post after another.   Last night silver traded up 7%, possibly at least partially on rumors that China would start dumping USD for hard assets.    Silver rallied to the very symbolic 50 level and reversed, now down 9% just from last night’s high.

If you want to buy the dip, here’s your road map.   In our experience it’s never a good idea to start picking at bottoms on the first day of a reversal.  The price-action is simply too heavy.
We wrote a few times about the change of angle of ascent — something that often precedes short-term tops.   Note now that silver is testing the steep trend-line.  We believe this will break soon.  The second line of defense is much sturdier, and it currently is around $40 on the $SI_F.    We’d be buyers on this secondary less steep trend-line.

What if you don’t trade futures?  Well, let’s take a look then at $SLV.   Instead of the 50 top we have here the $47 top.  Note how strongly it bounced today on the steep trend-line.  This most likely will break tomorrow.  Again, be careful going long on the steep trend-lines.  Risk/reward is often much better on the longer time-frame, milder ascent trend-line.
Secondary trend-line is currently also at $40.

If you want the silver miners there is a great spot coming up near 26.5 on $SIL

If you like the junior gold miners (plus a few silver) then $GDXJ has a nice support area near 36.