This week I will answer your questions on Silver, including “Using your charting system was there anything signaling the sell off?” In addition, “what would signal it is time to get back in?”
I will answer these questions using the most popular Exchange Traded Fund-Symbol SLV tracking the spot price of silver minus expenses. I will use my Simple Simon setup with a daily chart, money flow indicator plus my ever faithful trend lines (blue line). Look at February of 2013 when the price of SLV broke down through the trend line (blue line), and the money flow turned negative (bottom box). When the price dropped through the blue line and was confirmed with decreasing money flow, a system sell signal was generated around the $30 level. Keep in mind a system sell signal is also a signal to enter on the short side-a trade that would have been extremely profitable.
Some scoff at my trading systems but most importantly, it gave a system sell signal and would have gotten SLV traders out, thereby escaping the huge price crash.
Let’s jump to real time to answer your question, “What would I be watching for buy signals”? I will be looking for the price to close above a trend line (red line) and over my blue signal line. In addition, I want to see positive money flow (bottom box). Until these conditions happen, I would be hesitant about buying SLV.
What can we learn from this analysis? It is close to impossible to pick a perfect entry or exit but if we take the time to learn which signals gave previous (profitable) buy and sell signals we will have a much higher probability for (profitable) buying and selling decisions in the future. Like always, no system is 100 percent.
Next week, I will be answering your questions regarding the mining companies. If you want to learn more about trading Precious Metals and/or Charting (technical analysis), check out my Summer Seminar series going on now.
Plan your work, work your plan and learn to share your harvest!
Source-Stockcharts.com, thetraderseye.com
Full Disclosure-I do not hold any of the securities listed in this column.
DAVID O. ENGLAND is the founder of the Eye on the Market-Training Academy and retired associate professor of finance at John A. Logan College. For questions and seminar info, he can be reached at thetraderseye@gmail.com. The information above is for educational purposes only and is not intended to be financial advice. Your decisions to buy, sell, short, or hold any stock or investment product is a direct result of your own decision, free will, and research.
