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« A Readers View: Why Silver? | Main | Silver Prices and Silver Stocks Correcting »
Sunday
Nov182007

Silver To Present Buying Opportunity Soon

Silver prices recently peaked at over $16 and ounce but since then have dropped back to the $14.50 area.

Silver To Present Buying Opportunity Soon

After a drop of roughly $1.50 in the silver prices, our instincts are telling us that a trading opportunity could be rapidly approaching in silver. This opportunity has a double purpose.

Firstly it will allow us to add to our positions in some of our favourite silver stocks. Buying on pullbacks is a great way to make serious money during a bull market. If such a pullback should present itself over the next week or so, then we will be adding to our position in silver by purchasing more shares in certain silver stocks, preferably the stocks that are most oversold but also the quality silver stocks that have good fundamentals that will allow them to profit greatly from rising silver prices. These are the silver stocks that have performed well for us in the past and should continue to do so in the future as the bull market progresses. Such stocks are documented on this website, in our newsletter and you can also view them in our free online portfolio.


Secondly this pullback could give us a chance to make a short term trade on the silver price. Over the past few months we have made two trades on the silver price, and both of them were successful. During the summer silver took a battering in trading and we thought that it was oversold and therefore called for a 50 cent rise in the price of silver in the next few weeks. During the weeks following our BUY signal, silver gained a little over 50 cents and so our trade was a success.
Towards the end of the summer we made another trade on silver, again because we felt silver prices were oversold. For this trade we decided to play the market via a spreadbet (a bet on the futures price), which is free of UK Capital Gains Tax and so offers tax free profits to those who trade successfully. We called for a $1.00 rise in the price of silver over the next few weeks. We placed a limit $1.00 above the price and a stop $1.00 below. Silver prices rose $1.00 in the next month and so we made a 100% tax free profit in 30 days.
If silver should fall into another oversold situation then we aim to make another one of these trades, probably similar to the one we made at the end of the summer which, if successful, we generate another 100% tax free return in a relatively short time period.

Although we do not think that silver is in such a situation quite yet, there are a few aspects that we are keeping a close watch on for signs of a “bottom” in the price. The RSI is currently at 51.49 and we would like to see the index below 50 and the closer to 30 the better. We have circled the MACD indicator as the black has broken down through the red line which is a bearish sign. We would prefer to see the MACD below zero and give a bullish crossover when in negative territory before going long on silver. Likewise the STO could fall further and we would look for a positive crossover signal before signalling a BUY. Moving on from the pure calculated technical indicators, take a look at the support levels for the silver price. Silver is currently sitting at around $14.50, right on the black support line. If it brakes through this line, we could lose another 50 cents quickly as silver drops back to $14.00 before finding support at the same level at which it encountered resistance back in late September to mid October. Next up is support at $13.50 on the 200 day moving average line. We don't see silver prices falling further than $13.50 and so if silver dropped down to those levels, we would certainly be buyers.

However we will be watching the market closely this week, even though we are on the move and in travel mode at the moment. When we see a trading opportunity, we will let subscribers of The Silver Prices Newsletter and readers of www.silver-prices.net know immediately. Hopefully we can replicate the 100% returns this time around, but as always do your own due diligence and don't go mad on any one stock or trade as we do get it wrong from time to time. Keep updated on our signals and which silver stocks we are buying by subscribing to The Silver Prices Newsletter completely FREE of charge. Simply click here and enter your email address to subscribe.

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