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« Silver Standard: Time to Correct and Consolidate | Main | Silver-Prices.net: Portfolio Update 20th October 2007 »
Tuesday
Oct232007

Silver Still Heading for Correction: Trading Opportunity Approaching

Silver prices appear to have found resistance at the $14.00 level and one could argue that the silver chart below shows a double top formation in silver prices.

Silver Still Heading for Correction: Trading Opportunity Approaching

A double top formation means that a correction is due, and could signify that this coming correction in silver prices could be perhaps more severe than previously thought.

We think that a $1.00 drop in silver prices should be expected, which on the chart above would take silver down to $12.50. If one takes a look back at the trading patterns of silver, one notices that when silver corrects, it corrects hard and fast, usually within a few trading sessions. We could see silver correct very quickly in trading this week, do not rule anything out. The correction could be over in just one day, so if you intend to trade this market, make sure you closely monitor what's going on in silver each day. In august, silver prices dropped over $1.00 in just one day and it was shortly after this that we signalled a short term BUY on silver for a upwards move of $1.00. Details of the trade can be found on a website www.silver-prices.net but we traded silver via spreadbetting on the futures price and made 100% profit in 30 days. We intend to perform a similar trade after this coming drop, buying silver for another move up.

However the question we have at the moment is whether or not we short silver at this point. We are in no doubt that silver will correct very soon and so it looks ripe for a short. Silver could fall below $13.00 in the next week or so, therefore on the safe side we could short silver with a stop at $14.25 and a limit at $13.00, which would return roughly 60% in profits if successful. There is only one thing stopping us.

Precious metals can soar upwards sharply without warning. A significant geopolitical event could send silver and gold up sharply in a matter of minutes, which would not allow us enough time to close our trade. For example, Turkey has now massed over 100,000 troops on the border on Iraq, ready for military intervention in the Kurdish rebel strongholds. Although that area does not posses a great deal of oil, significant oil pipelines run through Turkey and if these are disrupted, gold and silver would spike up very quickly, wiping out our short position.

Therefore we are going to watch silver drop, and purchase more silver stocks and perhaps a futures position when we feel the correction is over, in order to profit from the next leg up. In the meantime we have maintained a core position in gold and silver stocks with some cash on the sidelines to add to our positions after the correction.

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Reader Comments (1)

General Comments:

I wanted to thank you for your insight into silver and gold stocks. I tripped over your newsletter a couple of months ago while surfing the net. I am relatively new to trading full time (2 years) but have traded part-time over the past 10 years.
I am very active in the precious metals, oil, alternative energy sectors of the market feeling that we are enjoying a resource bull market that will likely cool a bit next year (2008).
Your letter is concise offers excellent information (stock charts.com) and gets to the point.
Keep up the great work!
Regards,
Mark Farrell
Brighton Capital Inc.
Toronto, Canada

October 23, 2007 | Unregistered CommenterMark Farrell

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