In August 2010 and January of 2011, gold and silver presented excellent buying opportunities. But what now?
When one begins trading it is important to realize that it is like any other business and your goods are your stocks. There is a basic rule that one must learn and never forget when buying and selling merchandise. You must be prepared to accumulate your products when there is a panic and sell them when there is euphoria. One has to sell when the product is in demand and the investment public becomes aggressive and buy when it is out of favor and the public shows little to no interest. In August of 2010 and January of 2011, precious metals both gold and silver presented excellent buying opportunities.
Please note, as silver surpasses our late January target and continues its parabolic move since our buy signal, that my goal is to make significant profits and not get greedy for the extra 5-10%. Do not get me wrong. I believe silver and gold’s long term trend could push gold to $3,000 and silver to $100 by 2013, but I am welcoming a short term healthy correction of at least 20% in silver before I will consider buying again. I will wait for pullbacks and not chase silver at these elevated levels. The key to selling correctly is buying at the right time when the commodity is oversold and out of favor. Parabolic moves end with significant corrections and I would like to see a healthy pullback. This current blow off move means that a correction could be quite painful for the investor who has overextended themselves accumulating at euphoric levels. A healthy correction will improve the chance of an orderly and healthy uptrend and provide my readers with a secondary buy point.
My basic objective of this service is to help readers secure profits and realize gains. You must sell and take partial profits as targets are reached. Selling at overhead resistance or while it is still advancing is reminiscent of the great investors such as the Rothschild’s and Bernard Baruch who stated that no one gets the top or bottom. The goal is catching the majority of the move.
Once my technical targets begin getting hit, I begin to reduce my exposure as the price continues to advance past that target. One has to remember that the reason we are in this position of sitting with hefty gains is because we bought right in late January as gold and silver were oversold and reaching long term support. Now in late April three months later silver has reversed reaching overhead resistance and gold is still in the process of reaching the $1,600 target. I would use gold’s upper resistance line as a more valid place to look for profit taking opportunities on both metals.
It is important to learn to sell when others are too optimistic and buy when others are scared to death. Silver (NYSE: SLV) is close to 70% above the 200 day moving parabolically and surpassing overhead resistance, while gold is (NYSE: GLD) is only 12% above the 200 day moving average. This is extremely divergent from the historical mean. We may see silver stalling while gold plays catch up. We are in a buying hysteria and short squeeze in silver. During these times, it has historically been wise to sell into euphoria. When the herd begins exiting it may be painful, the pigs wanting the top may get slaughtered.
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