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What's Next for Silver and Gold?

Oct 19, 2012
Chad Karnes, CMT

Sentiment for Gold and Silver have been at extreme ends of the spectrum the last few months. Currently Silver optimism is still very high as prices continue to fall. Silver is approaching a few key price levels to keep an eye on.

On 9/12 when Silver was priced at $32.50 and the Commodities Index (NYSEARCA:DBC) was trading at $29.10, I wrote an article warning about the lofty levels of precious metals sentiment and suggested taking profits.  On 9/23 a Silver short was suggested to our subscribers with price at $33.48.  Since then price has fallen 7% to $31.15.  Where do we expect Silver and Gold to go next?

Combining Sentiment and Technicals for a Silver Buy Signal

At the ETF Profit Strategy Update we use sentiment and technical analysis to help us get ahead of market trends.  We did this with Silver (NYSEARCA:AGQ) and Gold (NYSEARCA:UGL) in late July when sentiment was negative and price was holding support around $26.

On 7/29 I was watching silver prices and informed our subscribers in our Technical Forecast that, “The rising red short term trendline support line currently just above $26 is also a good stop loss spot and support line to watch.  Good risk / reward set ups such as these are what we look for in our trading.”

The following chart accompanied that commentary showing the breakout, 200 day MA, and trendline support levels.  We also were watching sentiment, which was at an extreme.

 

On 8/5 after that rising red support trendline held, I followed up with, “For aggressive traders that are long SLV I have identified two good stop levels with the horizontal support at $26.55 as well as the lower rising support trendline at $26.15.”  Prices rallied from there.

The opposite occurred in September as sentiment shifted to extremely positive after the large August gains.

Combining Sentiment and Technicals for a Silver and Gold Sell Signal

In our 9/23 Technical Update at a price of $33.48, we suggested a short position on Silver (NYSEARCA:ZSL) due to sentiment extremes and technicals.  “A break below channel support would likely target a larger pullback to the 200 day MA also where the Fibonacci support zone lies” we stated.  We suggested stops above  that week’s high price of $34.  Silver presented a great risk/reward opportunity with a stop less than $1, but potential gains of $3-$5.  The following chart accompanied that update.

 

What's Next for Silver and Gold?

Today with Silver prices below $32, our first target of October’s S1 pivot has been reached.  The next stop for Silver (NYSEARCA:SLV) is likely $31 where trendline, moving average, and Fibonacci support resides.  Gold (NYSEARCA:GLD) is in a similar position, but showing relative strength to silver which likely means it won't fall as far.

The ETF Profit Strategy Newsletter provides comprehensive sentiment and technical analysis to identify high probability trade setups across multiple tradable ETFs and Assets.  Gold and Silver were overbought with high levels of sentiment that setup a high probability selling opportunity. Our Technical Forecast, published a few times each week, is watching the key support levels that could provide great Gold and Silver buying opportunities again.  

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