Silver 'N' CDE

August 29, 2005
"AN EXPLOSION IS COMING!"

First, my family would like to extend our hearts and our prayers to those living in the Gulf Coastal Region. May God step into your lives and protect you.

We might be a tad bit early with these thoughts, but it should make little difference. Markets will always follow their fundamental nature, and the fundamentals look superb for Silver. Someone has even suggested that more Silver has been sold through paper proxies, than even exists. When I look at where this world seems to be headed, I don't doubt it.

Inflation is reported to be mild and under control, but that is not what I see in real life. Oil has doubled in price, and the oil price eventually works its way into the price of everything. Debt, or what is currently termed as credit, is flying off the charts in all sectors. There is little doubt that this debt accumulation cannot continue, on. The massive debt load will lead to a stagnation of the economy even in the least painful scenario.

So, where does that leave us? The most likely path is one of Stagflation, where prices continue to rise dramatically, as the economy remains stagnant. Rising prices exemplified by rising oil prices along with flat earnings………boy that one seems familiar. Oh, yeah, that was the 70's wasn't it? And what did the price of Silver do in the 70's? An explosion is coming!

THE SILVER CHART

Silver has corrected in the form of a very large contracting triangle. Some believe that we have recently broken down, out of the triangle, but these triangles are not always perfect. In fact, at key times it is not uncommon for certain interests to trade opposite the established, or coming, trend as they build positions for the next intermediate move. This little countertrend move might be called "the hook." It is the move that catches investors off-guard while certain entities build positions and cover shorts. This is what I think we have recently seen. I might be forced to adjust the trend channel slightly, but the next target rail I am pretty comfortable with. Notice that the MACD has tightened up in a 5 wave triangle while the black ADX line has a falling wedge appearance. If both break to the upside- watch out.

The Silver chart is annotated as an angled-inverse-head-and-shoulders formation. The first time I saw such a formation was in a chart illustrated by CaptainHook of TreasureChests. The Silver formation is very angled, meaning that upside moves can be very explosive.

CDE

I have decided to illustrate the chart of CDE as a proxy for the Silver stocks. Please remember that although I might use some Elliot Wave symbols to depict certain moves on a chart, I certainly consider my EW analysis to be rudimentary at best.

The following chart of CDE shows that it has made 2 large percentage moves since it bottomed. Each of the moves has appreciated at approximately the same angle per rise. I suspect that CDE has already started another rise that will prove to be similar to the first 2 rises. In fact, the early portion of this latest rise looks very similar to the last one. There is strong resistance on the chart from the $13 area, on up. I will use the $13 target as a potential point to consider, though the upper trend line will be around $18.

The CDE chart is also an angled-inverse formation. We can see a positive divergence to price in the MACD line, and the ADX line has moved up confirming that the MACD might be signaling a trending move, higher.

Another way to look at CDE is by using a circle that touches many different points on the chart. Such a circle might help to demonstrate the potential parabolic rise in price. We are talking about symmetry. When price moves sideways to hit the side of the circle, then breaks upward, a strong move tends to occur. That is the potential that I currently see in the chart of CDE at this time. This is an arithmetic chart.

CDE- CUP AND HANDLE

The last chart we will look at, today, is one I drew for someone to show what a cup and handle formation might look like. Once I started drawing the chart, I realized that I might as well show the first 2 cups, plus the potential cup that might be forming, now. Notice that the current side of the cup is developing much like the right side of the previous cup. (Price started moving up above the line, dropped below, then traded up to the line and reversed lower. Somewhere in this area for the 2nd cup, the price reversed and trended strongly to much higher prices.) I have illustrated some of the resistance points at the top of the 3rd potential cup. The range of resistance runs from about $13 to about $18.

Again, I'd like to thank all of the posters at the GOLD-EAGLE Forum for their daily input. This thank you is especially extended to TQ and to Grininbarrett. Special thanks go to Dr. Vronsky and Westerman for creating the GOLD-EAGLE site and for editing my work. The Gold-Eagle Forum can be linked at www.gold-eagle.com/cgi-bin/gn/get/forum.html.

Thanks also go out to CaptainHook and David Petch of TreasureChests. They can be found at www.treasurechests.info/index.php.

There are many great editorials that can be found on the Gold-Eagle site at the following link. www.gold-eagle.com/research/petchndx.html

 

E-mail contact:

Act0319@aol.com

Please understand that the above is just the opinion of a small fish in a large sea. None of the above is intended as investment advice, but merely an opinion of the potential of what might be. Simply put:

 

The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions.

A one-ounce gold nugget is rarer than a five-carat diamond.

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