A few things your sleepy Gold Enthusiast would like to point out. First, this wasn’t a straight run-up; there were a fair number of small corrections/fallbacks/
Second, the RSI was clearly in overbought territory for a while there. That’s not at all unusual during run-ups, but the RSI peak of 84 was a clear warning not to put any new money in. It can be very hard to know when to sell but it’s not that hard to see when a sector is clearly overbought. (For true newbies, the general rule about RSI is that anything over 70 is overbought, and over 80 is VERY overbought.)
The rising uptrend support line shows the current uptrend is still intact until around 16.50, so we’ll be watching 16.40 as the last line of defense for the current run. Your Gold Enthusiast is not a betting man, but if he was pushed for a prognostication he’d have to say he expects the uptrend line to be broken by a consolidation, not by a big drop.
Much of the run-up was probably due to silver being so ridiculously inexpensive compared to gold. Investors suddenly noticed that and rushed in for the sale price. Of course that drove the price up; some will doubtless sell or have already sold, but some were smart and didn’t buy everything they wanted to. Those folks will come back in and buy on the dip eventually – it’s not happening yet, but that may come in a few more days. Then we’ll see where the consolidation starts.
Signed,
The Gold Enthusiast
DISCLAIMER: The author has no position in any mentioned security. The author is long the silver sector via small positions in USLV, PAAS and SVBL. He may daytrade around these positions but has no intentions of trading out of these core positions in the next 72 hours.
The iShares Silver Trust (SLV) was trading at $16.91 per share on Tuesday morning, up $0.08 (+0.48%). Year-to-date, SLV has gained 5.75%, versus a 11.58% rise in the benchmark S&P 500 index during the same period.
SLV currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #9 of 33 ETFs in the Precious Metals ETFs category.
This article is brought to you courtesy of ETFDailyNews.com.
About the Author: Mike Hammer
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.
