first majestic silver

Gold Market Update

Technical Analyst & Author
January 23, 2007

Subtle but important changes in recent days have substantially increased the chances of upside breakouts by gold and silver. The situation is now very finely balanced with an army of traders either sat on the fence, or, depending on which way it breaks, on the wrong side of the trade. When it does break out - and it is beginning to look like it will be to the upside, there will be a stampede and an upside breakout from here could thus easily involve a $20 - $30 up day for gold.

On the 6-year gold chart we can see how it has managed to remain above its key 300-day moving average in recent days, close to which, as can be readily seen, it has found support throughout its bull market. With the recent small Head-and-Shoulders top, which we traded successfully, having aborted, we are now able to draw in the upper blue trendline shown. The situation is now extremely technically tight, with gold also being pressured from above by the falling red trendline. Clearly, this is a situation that can be expected to force a breakout to start a new trend very soon now.

The recent dramatic breakdowns by Copper and Oil have provided an unwelcome bearish backdrop for the Precious Metals so far this year, and resulted in us adopting a cautious stance thus far, but because gold and silver have managed to hold their ground in the face of this, coupled with the fact that both Copper and Oil are now deeply oversold and look set to turn up shortly, their bearish influence is now quickly abating, thus taking the brakes off the Precious Metals. In fact, given that an attack on Iran is actually a growing possibility, the huge drop in the oil price borders on insanity - it would appear that this market is looking no further than the warm winter and the rout of the Republican oil men in the November election. We will be reviewing oil again shortly on www.clivemaund.com

While the action of many large gold and silver stocks remains ambiguous and difficult to decipher, upside breakouts in a range of junior and exploration stocks have been observed in recent days, which provides additional, if perhaps somewhat unreliable, evidence that an upside breakout by gold is in the works.

Because we have arrived at a major crossroads which is expected to generate a big move, after a large trading range that has dragged on for about 9 months, more sophisticated traders will readily appreciate that this is an excellent point at which to buy both calls and puts simultaneously, which is known as a straddle. You buy both calls and puts, and once the market declares itself by breaking out, you then have the choice of dumping the losing side of the trade for whatever you can get, which normally increases the prospective profit from the position, but leaves you vulnerable to being whipsawed, or leave it open in the knowledge that the winning side of the trade cancels out the losing side by a large margin, assuring substantial gains. We will be looking at some straddle possibilities on www.clivemaund.com shortly.

 

Silver Market Update

Clive Maund

Subtle but important changes in recent days have substantially increased the chances of upside breakouts by gold and silver. The situation is now very finely balanced with an army of traders either sat on the fence, or, depending on which way it breaks, on the wrong side of the trade. When it does break out - and it is beginning to look like it will be to the upside, there will be a stampede and an upside breakout from here could thus easily involve a $1 - $1.50 up day for silver.

On the 1-year silver chart we can see how, after looking decidedly vulnerable to further retreat, silver has held support in the $12.20 area and turned up, in the process breaking the red downtrend line shown on the chart, and thus appears to be completing a minor base, the top of which is defined by a resistance level at $13.20 - $13.30. The important point to note here is that although it has made very little progress price wise, the sideways action at this juncture has greatly improved silver’s technical condition, tangible evidence of which is provided by the MACD shown at the bottom of the chart crossing above its moving average, a frequent precondition for a new uptrend. It is also noteworthy that this minor base, although it cannot be confirmed as being complete until it has broken above $13.30, has formed ABOVE the trendline drawn from the June low, implying increasing strength and improving the chances of silver breaking above the important resistance at the highs of last April and May on the next run.

Given that gold can be expected to stage a powerful advance if it breaks out upside from its large trading range, it would appear that silver, which has been stronger than gold in the recent past, should have little trouble in breaking out to new highs. The now bullish outlook will remain intact as long as silver remains above the lower uptrend line shown.

 

Clive Maund, Diploma Technical Analysis

[email protected]

www.clivemaund.com

Copiapo, Chile, 23 January 2007

Clive Maund

Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.

Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.

The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.

Visit Clive at his website: CliveMaund.com


It is estimated that the total amount of gold mined up to the end of 2011 is approximately 166,000 tonnes.
Top 5 Best Gold IRA Companies

Gold Eagle twitter                Like Gold Eagle on Facebook