Monday Evening 25 July 2011
In our last article on silver, we said we would be watching the daily
chart closely, after a strong weekly close. [See Silver - Important
Weekly Close, click on http://bit.ly/qMvyLd, first paragraph after first
chart]. On a positive note, the correction that followed the last article
was a two day, first degree correction, a positive indication of a
market moving higher. The confirmation of the second day was
confirmed in the overnight trade, and that increased risk in buying
during the day session, so no purchase was made. This is one
market that can punish a poorly timed entry at any given time.
You can see the breakout from last week. the question is, will it
hold and launch prices to the next higher level above $40? Too
soon to tell for no one knows how the market will unfold from here.
You have to make a determination on the information available, and
most of it has been positive.
A look at the daily shows a small consolidation over the past few
weeks that developed on top of a previous resistance level. That
is typically bullish. Monday's close was not strong at mid-range the bar, but that is just one day, not meaning to ignore it, but using all
the information available. The possible offset to the neutral to
slightly negative close, especially on increased volume is that most
of the day's activity was a sell-off from a slightly higher level. While
the increased volume COULD be viewed as negative, the downside
was actually limited.
We took a long position. See next chart.
The wide range bar with a close just under the half-way mark on
the bar was on a large increase in volume. The close off the
bottom said buyers were supporting lover levels. Given the weekly
and daily charts showing a potential breakout, going long with a
stop under the $40 level offered a reasonable risk exposure for a
potentially substantial gain. The risk consideration was key.
The stop for the 40.50 long position was 39.85, allowing for
"slippage" under the Sunday evening low of 40.10. There was
another sell-off after entry, and the low was 39.87. Notice the high
volume bar for the day's low and the position of the close. The
close was upper range of the bar telling us that buyers overwhelmed sellers and won the battle, at that point.
The potential failed low, [We want to see confirmation that it holds],
exceeded the Sunday evening low and caught whatever sell stops
weak longs placed, hoping to keep a smaller risk. Will the trade
work? That remains to be seen, but the underlying market
development says, if this is not the start of the breakout, it is getting
closer. There is risk in every trade. the reasoning behind this one
makes sense, even if it does not work, for the risk is more than
reasonable for the market under consideration.
Another very positive way of being in what is likely to be a dynamic
bull market is the buying of physical silver, one ounce American
Eagles, silver bars of varying sizes depending upon one's financial
ability. A consistent buying program will reward those willing and
patient enough to keep on buying, whatever the price when extra
funds are available. We have paid for physical silver when price
was at $48. When you own and hold physical silver, there are no
margin calls. This is a longer term commitment that can produce
relative wealth, and not just protection against the unlimited issuing
of fiat by that private corporation known as the Federal Reserve.