Precious metals and their related mining
stocks continue to underperform the broad market. This year's heavy
volume breakdown below key support has many investors and trader's
spooked creating to a steady stream of selling pressure for gold and
silver bullion and mining stocks.
While the technical charts are telling me
prices are trying to bottom we must be willing to wait for price to
provide low risk entry points before getting involved. Precious metals
are like any other investment in respect to trading and investing in
them. There are times when you should be long, times to be in cash and
times to be short (benefit from falling prices). Right now and for the
last twelve months when looking at precious metals cash has been king.
Since 2011 when gold and silver started to
correct the best position has been to move to cash or to sell/write
options until the next trend resumes. This is something I have been
doing with my trading partner who focuses solely on Options Trading who closed three winning positions last week for big gains.
In 2008 we had a similar breakdown in price
washing the market clean of investors who were long precious metals. If
you compare the last two breakdowns they look very similar. If price
holds true then we will see higher prices unfold at the end of 2013.
The key here is for the price to move and
hold above the major resistance line. A breakout would trigger a rally
in gold to $2600 - $3500 per ounce. With that being said gold and silver
may be starting a bear market. Depending what the price does when the
major resistance zone is touched, my outlook may change from bullish to
bearish. Remember, no one can predict the market with 100% accuracy and
each day, week and month that passes changes the outlook going forward.
The chart below is on I drew up on May 3rd.
I was going to get a fresh chart and put my analysis on it but to be
honest my price forecast/analysis has been spot on thus far and there is
no need to update.
Gold Daily Technical Chart Showing Bottoming Process:
Major technical damage has been done to the
chart of gold. Gold is trying to put in a bottom but still needs more
time. I feel gold will make a new low in the coming month then bottom as
drawn on the chart below.
Silver Daily Technical Chart Showing Bottoming Process:
Silver is in a similar as gold. The major
difference between gold and silver is that silver dropped 10% early one
morning this month which had very light volume. The fact that silver hit
my $20 per ounce level and it was on light volume has me thinking
silver has now bottomed.
But, silver may flounder at these prices or near the recent lows until its big sister (gold) puts in a bottom.
Gold Mining Stocks Monthly Investing Zone Chart:
Gold mining stocks broke down a couple
months ago and continue to sell off on strong volume. If precious metals
continue to move lower then mining stocks will continue their journey
lower.
This updated chart which I originally drew
in February warning of a breakdown below the green support trend lines
would signal a collapse in stock prices, which is exactly what has/is
taking place. While I do not try to pick bottoms (catch falling knives) I
do like to watch for them so I am prepared for new positions when the
time and chart turn bullish or provide a low risk probing entry point.
While I focus more on analysis, forecasts and ETF trading another one of my trading partners who focuses on Trading Stocks and 3x Leveraged ETF's has been cleaning up with gold miners.
Gold, Silver and Mining Stocks Conclusion:
Precious metals continue to be trending
down and while they look to be trying to bottom it is important to
remember that some of the biggest percent moves take place in the last
10% of a trend. So we may be close to a bottom on the time scale but
there could be sharply lower prices yet.
The time will come when another major
signal forms and when it does we will be getting involved. The exciting
this is that it could be just around the corner.Please share this article
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