Gold and Silver ETFs on Fire: Get Ready for a Reversal

So far this week has been generous with our commodity ETFs moving higher, other than natural gas which is clearly in a bear market. Each of the commodity ETF trading charts below is at a different stage and it will be interesting to see how things unfold in the coming weeks.

Trading ETFs is very rewarding when done properly and using multiple time frames for timing your entry and exit points is crucial. My main focus is on the weekly and daily charts but I use a 30 minute intraday chart when the time comes to actually pick an exact buy or sell point. Below I have provided both the weekly and daily charts so you can see how the same ETF looks completely different on the two time frames.

GLD ETF Trading – Weekly & Daily Trading Charts
The weekly chart shows a nice multi month rally but is now starting to go parabolic (straight up). When this happens I start tightening my stops so that I can lock in maximum gains. Now jump over to the daily chart and notice that gold has rallied longer than the previous move in early October. It looks overbought and ready for a pullback. Pullbacks on strong rallies like this tend to be hard and fast as stop orders get triggered sending prices tumbling down on heavy volume. My general thought is 5 days up in an investment is given back in 1 down day. This is why I scale out of positions when they are looking long in the tooth and ready for profit taking.

SLV ETF Trading – Weekly & Daily Trading Charts
Silver had been under performing gold for several weeks but made up some nice ground this week. Gold and silver tend to trade together so if gold pulls back I figure silver will also. That being said the weekly chart of silver looks ready to rocket higher for another week or so.

USO Fund Trading – Weekly & Daily Trading Charts
While gold and silver have been moving higher oil has been flagging sideways taking a breather. Both the weekly and the daily charts are aligned for a nice move higher if the trend and charts follow through on their patterns. We could get some tradable action in the next couple days.

UNG Fund Trading – Weekly & Daily Trading Charts
Natural gas is really starting to slide. Wednesday UNG dipped below the Sept low of $8.94 by a couple cents then moved up into the close. Overall it’s not bullish. This could be the start of a waterfall sell off which is a sharp heavy volume sell off that lasts 3-5 days.

Commodity ETF Trading Conclusion:
To sum everything up the gold and silver ETFs are on fire as they continue to surge higher. Being ready for a sharp reversal is important if you want to lock in gains on a portion of your position.

Crude oil is taking its time but looking ripe for a breakout higher. We continue to watch for some action.

Natural gas continues to get pushed down and it’s not looking good for higher prices anytime soon. We are waiting for a shorting opportunity or an oversold condition to play a 1-5 day bounce.

Quick Trading Tip: If you have a position which has done well and has moved up for an extended period of time be sure to draw some trend lines and tighten your stop, or set a stop, under a tight trend line. Sell some of your position (25-50%) to lock in gains and let the core position continue to mature. If you get a pullback to a support level (previous breakout level) you can buy back your other part of your position at a lower price.

Disclaimer: I currently own the GLD ETF.

Comments

[prairiedog555]

I was a casino mgr in LV. I had a group of big rollers that I got to know. I asked them what they did to make money.
They explained that they belonged to a consortium that bought/sold commodities. They gleefully explained how they manipulated the market by leaking info buying but then shorting ect.
I relay this information so that you have no illusions that the deck is stacked, so buy/sell accordingly.

2009 Nov 19 07:30 AM

[jimbo's gravy train]

"Gold and silver tend to trade together so if gold pulls back I figure silver will also. That being said the weekly chart of silver looks ready to rocket higher for another week or so."

Classic comment covering both ends. "Well, it looks like silver and gold should pull back but they just might sky rocket for a week or so." I love these decisive commitments.... TO NOTHING!

Folks, hang tough with silver. There will be peaks and valleys with this volatile commodity but in the end silver breaks $20 and those of us holding on can ring in the new year with a smile while the day-traders wonder why they missed the boat.

2009 Nov 19 08:27 AM

[Scruffy]

a classic look at the charts, are these classic times?

2009 Nov 19 10:18 AM

[Erick Tippett]

Is trading in and out of gold/silver such a good idea? I thought the
hard commodities were supposed to be long-term insurance
against the current weakening fiat currency. Excuse my ignorance
but fancy charting doesn't impress me at all!

Erick Tippett
Chicago, Illinois

2009 Nov 19 01:44 PM

[John Mylant]

"Now jump over to the daily chart and notice that gold has rallied longer than the previous move in early October. It looks overbought and ready for a pullback. Pullbacks on strong rallies like this tend to be hard and fast as stop orders get triggered sending prices tumbling down on heavy volume."

I like this philosophy...this is nothing but smart thinking we all need to take into account. Sometimes we forget those computers can trigger a move in the market with their pre-set sales settings.

John Mylant
mylantsmoneyblog.typep.../

2009 Nov 19 03:28 PM