Wednesday, July 2, 2014

Silver Traders: Here's Your Next Move

Silver has made a massive move over the past two weeks.
The metal rallied from less than $19 per ounce to more than $21. And this has some folks wondering if it's time to buy...
Take a look at this weekly chart of silver...
Silver has broken out of a long-term consolidation pattern. I expect the metal to rally to $26 sometime later this year. So if you don't own any silver, buying it here is not a bad idea... But be prepared for some downside action in the short term.
You see, silver is wickedly overbought right now. Take a look at this chart...
You can see that silver is overbought by looking at the 14-day relative strength index (RSI) – a short-term momentum indicator – at the bottom of the chart. This indicator recently rose into the 80s... which is an extremely overbought reading. Note that similar readings flashed in mid-2013 and this past February. Both were followed by sharp corrections.
The full stochastics – another measure of overbought and oversold conditions – is also at a level that often precedes at least a short-term pullback in the price of silver. And the chart is bumping up against a down-trending resistance line. Silver looks set for a short-term pullback from here. So, traders should wait to buy until silver works off its overbought condition.
Yes, silver could still go higher. And this doesn't mean I'm selling any of my silver. I'm just not adding to my position at this level. But I will buy aggressively on a pullback to around $20. That's about 5% lower than where it is right now. And it's when traders should look to buy.
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The Men who Crashed The World

China is buying up all this gold for a reason and it is not because gold is now relegated to a monetary relic. As part of the BRIC community they will soon have the currency most desired in world trade and markets. 
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Maund On Silver

Latest COT data released on Friday shows an astounding ramp in Commercial short positions in silver that it believed to be unprecedented, and given that silver is now critically overbought after 14 up days in a row up till last Thursday, it is safe to assume this means trouble.

On silver’s 6-month chart we can see its robust advance of recent weeks and how it has arrived at a resistance level in an extremely overbought state – critically overbought in the case of its RSI indicator. Without looking at the COTs we would expect it to consolidate or react back somewhat here before the advance resumes. When we take into consideration that the Commercial’s short positions in silver have exploded in just 2 weeks to levels exceeding those ahead of the March peak, and also that gold has just stalled out at important trendline resistance, it becomes clear that there is trouble brewing, and that it is probably imminent.
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Raytheon Company (NYSE: RTN)

Raytheon Company develops integrated products, services, and solutions in the areas of sensing; effects; command, control, communications, and intelligence; mission support; and cyber and information security worldwide. It operates in four segments: Integrated Defense Systems; Intelligence, Information, and Services; Missile Systems; and Space and Airborne Systems. Raytheon Company serves the U.S. Department of Defense (DoD), the U.S. Intelligence Community, the Federal Aviation Administration, the U.S. Armed Forces, the National Oceanic and Atmospheric Administration, Department of Homeland Security, the National Aeronautics and Space Administration, and other international customers.
Please take a look at the 1-year chart of RTN (Raytheon Company) below with my added notations:
1-year chart of RTN (Raytheon Company)
For the most part, RTN rallied nicely up to April of this year. However, the stock has been trading sideways for the last few months while holding an important level of support at $95 (blue). Earlier this week the stock finally broke that support. RTN should be moving overall lower from here.

The Tale of the Tape: RTN had a key level of support at $95. Now that the stock has broken support, a trader might want to enter a short trade at or near the $95 level with a stop placed above that level. A break back above $95 could negate the forecast for a move lower.
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Ask The Expert – John Williams (June 2014) | Sprott Money News

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