A lot of financial analysts and gurus have been talking about gold and silver lately. Usually,when an asset class is overheating and in need for a pullback, cnbc and others like them are starting to jump on the bandwagon near or at the intermediate top. I have been trading in and out of silver this year by buying the dips and selling into strength. That has been a working strategy,but right now,i do not want to get involved in the silver trade immediately.
I think it would be healthy,if it stayed around 40$-45$ for a while. When i look at the weekly chart of silver,i just can’t get myself to buy it here. Of course it is possible that silver starts running again tomorrow,but when i look at it from a risk reward standpoint, it is not possible for me to get excited right now.
To get me really excited again two things should happen: when QE 2 ends, the market should see a pullback and the metals an even stronger one. If that happened,i would hope that silver started trading in a range.As soon as it finds strong buyers at a certain level i would buy again and hold it against that level until the market tells me to get out again.
I have not shorted for months now,because i just don’t like to trade counter trend. I would rather wait and do nothing,because the patterns are less reliable,when you short in a bull market. Especially the “head and shoulders” pattern has been failing many times. In the metals there have even been more failed breakdowns. The break of a support level in silver for instance has often been the best time to watch closely for a new entry,because as soon as it broke down, it reversed and the shorts got squeezed.