Thursday, June 16, 2011

Silver In Focus

By Scott Pluschau, Contributing Editor to the ETF Digest.

Let's take a look at the Silver Exchange Traded Fund symbol SLV again. It was back on May 5th, 2011, that I did a write-up on SLV that can be found here:

I mentioned at that time that markets rarely make V-tops and there is a good probability that once we have a new balance area form in the intermediate term time frame and it can breakout to the upside the highs will be tested again. I also felt that there would likely be minor support in the $33-35 area.

I also felt that since Silver was in vertical development (strong bull market trend) in the weekly time frame, that a new consolidation area would likely be forming sooner then it retracing back to the prior balance area where it would likely have found major support. This market to me looks healthy in the big picture. I have marked these consolidations or as I call them from an Auction Market Perspective “Balance Areas” with blue rectangles. It is in the weekly time frame, that the market has currently found value in my opinion. The price action inside this balance area is likely to resemble randomness or noise. I want to avoid that at all costs.

I have no interest in buying silver or selling silver in the intermediate term time frame and from a technical standpoint unless it is at the extremes of the balance area. If I had to sell silver it would either be on the next rally toward the top of the balance area or on a breakdown from this balance area.


Let's look at the chart again and imagine this is an intraday chart with five minute bars rather than a weekly chart? Auction market principles can be applied to all markets in all time frames. Would you be looking to sell here? I know I wouldn't. I would be looking to buy at the appropriate price or add to my position on the breakout and in the meantime I would be stepping aside. My bias is to the long side until the price has broken down from this balance area. A rally back to the balance area after a breakdown would then become a low risk short trade for me.

Right now I am looking to for a low risk entry to buy on a reversal from the extreme lows of this balance area, (approximately $32.50), and I will be adding to it on a breakout to the.....

View the original article here

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