Friday, May 06, 2011

It's never different, part II

We wrote back on April 16 our post on “It’s never different” which basically stated our case for the coming top in silver.  We added thoughts to the argument in our “Elusive Silver Top“  post on April 21.    Forward ahead a few weeks and we’re 30% down from the highs.
As we tweeted yesterday we started buying GDX SIL GDXJ and stated exactly what we were going to do yesterday in “The Plan“.    We argued the other side this time, that in our experience when multiple supports hit at the same time:

“often two things happen:  1) it bounces or 2) panic overshoots and then bottom forms and stocks run back into primary support. We can’t remember the last time we saw so many stocks hit support at the same time — we think a bounce is coming soon and are positioning ourselves to take advantage of it.”

As evidence for our case we posted 9 charts, the main charts we follow in the sector, and demonstrated how each and every one had hit support.  Today the rally.  We would have been fine to add into overshoots (and had braced each other for significant pain) and had a very detailed plan on where to add and what levels, etc, versus our buying power.  We even had “emergency plans”.

Thankfully it didn’t come to that.  We have already locked in 3/4 of the swing for very nice profits and are holding the last 1/4 possible swing if we can get enough of a cushion (up 2% -3.5% now on last positions).   Our stops now are firmly above our entry.  (update, took the last 1/4 as 20EMA on 5 min failed just before noon, all cash).

Short-term tops are rarely different, but also short-term bottoms are also rarely different.   Both sides work just as well.  We’ve already locked in our best week of 2011 (and put on a lot of real-time trades out there this week, 2 basket daytrades on Wed and Thursday and now this swing).
Trust your experience, but also always have a back-up plan.
We tweeted our last 1/4 position exit at 11:53 PM once we noticed the 20EMA/5 min failing on our stocks.  If you’re a short-term trader use the EMA.  Blue rectangle is our last 1/4 partial exit and as you can see selling picked up after that.   Might go higher later on but as short-term traders we would have been already been stopped at lower prices.   If you’re a longer term trader then of course it’s not relevant.