Gold and Silver Stocks Correct Lower

Gold and Silver finally had a significant down day today as gold was down about $11 and silver down about $.20. We were certainly due for a correction as many silver stocks hit or were close to 52 wk highs this past week and have increased in value about 7% in the last 2 weeks.

It’s hard to say if this is the start of the next pullback but this last runup does look similar to the previous ones this year that were followed by major corrections. So if there’s any time for one, I’d say that now would be the best time to play short term put options.

Silver has been doing a lot of catching up by taking out its former 52 wk highs, but it has been there before, followed by sharp downward corrections. Something about these metals rallies still tells me it’s a seasonally based and a true breakout would be much more obvious and news-based. I’m probably the most skeptical commodities bull around, as I consistently downplay big rallies on the fact that there are plenty of other market forces that are keeping metals within certain ranges.

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About Aaron Basile
Market Technician, Equity/Commodity Trader, Austrian Economist, Contrarian Investor

3 Responses to Gold and Silver Stocks Correct Lower

  1. Aaron says:

    Excellent post, though I’m very bullish on the precious metals. I’ve actually set up for a trade on Endeavor Silver (EXK), which I think is going to make another run — which could start as early as tomorrow. I think silver’s new support level will be at least in the upper $39/oz range, or even a bit above $40. This sell-off was just part of the cycle which has been making me money for quite a while! :)

    I’d love to hear your thoughts on my latest post about my trade setup.

    http://capitalcentral.wordpress.com/2011/04/12/tomorrows-trade/

    Best regards!

    Aaron T. Carter

    • aaronbasile says:

      Thanks, Endeavour is a good growth silver play – looks like it has solid support at $10, I’d be a buyer at that level.

      Silver itself is still pretty overextended and I think it should at least come back to the 20 Day MA before moving higher again.

      • Aaron says:

        You could be right. I think that it may go a bit lower tomorrow, maybe even have a slight downside bias till next week. But I don’t think it will come in hard. I think it’s going to pop up a bit soon, and drag its moving average higher, and show strong support near $40. With the trade I’ve set up, I’m counting on the fact that EXK has been battered already, and we still have high silver prices to back it up…so maybe it does go lower, I double down, and should hopefully bank on it when it pops again.

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