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« Endeavour Silver Corp: Watch for Buying Opportunity | Main | Silver Portfolio Update: 08 May 2007 »
Monday
May142007

Silver: May 2006 verses May 2007

Silver Chart 14 May 07

Last May 2006, we saw the “sell in May and go away” crowd in action and wondered if we would see a repeat of this sell off in 2007. The truth is that we do not know what the herd will do but we do have a couple of observations that show that Silver is in a vastly different position this year to last year.

Taking a look at the chart for the time frame in question we can see a number of differences between May 2006 and May 2007.

We will look at May 2006 first.

We can see that the price of Silver had raced ahead of its moving averages leaving the 200 DMA a long way behind. In fact the difference between the Silver price at $15.00 and the 200 DMA at $9.00 is approximately $6.00. You can see that this is a huge gap overdue for a correction.

Also note where the technical indicators are: The RSI, the MACD and the Stockastics are all above their middle point with two of them banging on the ceiling. This is telling us that this is an overbought situation.



Now we will look at May 2007.

The price of Silver has made steady progress over time taking the moving averages along with it for the ride. The price of Silver is at $13.00 and the 200 DMA is also at $13.00 so the difference is only a few cents and not the massive disparity that we saw a year ago. This tells us that the price of Silver has not run too far ahead itself as it did in May 2006.

Now note where the technical indicators are: The RSI is close to 30, the MACD is neutral and the stockastics are heading south towards the 20 level. In summary they are more or less telling us that silver is over sold, which is dramatically different from the overbought situation of May 2006.

These are just observations that we can add to our deliberations while trying to decide which course of action we should take. However it suggests to us that if there is a sell off this May then it could be a mild one lasting for a short time only. Gold is also in a similar position and in our view any sell off will also be short lived. This could just be the buying opportunity that you have been waiting for?

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