Metals ETFs: Is A Healthy Correction Overdue In Gold And Silver? (GLD, IAU, SLV, ZSL, AGQ, GDX, GDXJ)

Jeb Handwerger:  When one begins trading it is important to realize that it is like any other business and your goods are your stocks.  There is a basic rule that one must learn and never forget when buying and selling merchandise.  You must be prepared to accumulate your products when there is a panic and sell them when there is euphoria. One has to sell when the product is in demand and the investment public becomes aggressive and buy when it is out of favor and the public shows little to no interest.  In August of 2010 and January of 2011 precious metals both gold and silver presented excellent buying opportunities.

Please note as silver surpasses our late January target and continues its parabolic move since our buy signal, that my goal is to make significant profits and not get greedy for the extra 5-10%.  Do not get me wrong.  I believe silver and gold’s long term trend could push gold to $3000 and silver to $100 by 2013, but I am welcoming a short term healthy correction of at least 20% in silver before I will consider buying again.  I will wait for pullbacks and not chase silver at these elevated levels.  The key to selling correctly is buying at the right time when the commodity is oversold and out of favor.  Parabolic moves end with significant corrections and I would like to see a healthy pullback.  This current blow off move means that a correction could be quite painful for the investor who has overextended themselves accumulating at euphoric levels.  A healthy correction will improve the chance of an orderly and healthy uptrend and provide my readers with a secondary buypoint.

My basic objective of this service is to help readers secure profits and realized gains.  You must sell and take partial profits as targets are reached.  Selling at overhead resistance or while it is still advancing is reminiscent of the great investors such as the Rothschild’s and Bernard Baruch who stated that no one gets the top or bottom.  The goal is catching the majority of the move.

Once my technical targets begin getting hit, I begin to reduce my exposure as the price continues to advance past that target.  One has to remember that the reason we are in this position of sitting with hefty gains is because we bought right in late January as gold and silver were oversold and reaching long term support.  Now in late April three months later silver has reversed reaching overhead resistance and gold is still in the process of reaching the $1600 target.  I would use gold’s upper resistance line as a more valid place to look for profit taking opportunities on both metals. 

It is important to learn to sell when others are too optimistic and buy when others are scared to death.  Silver (NYSE:SLV) is close to 70% above the 200 day moving average, moving parabolically and surpassing overhead resistance, while gold (NYSE:GLD) is only 12% above the 200 day moving average.  This is extremely divergent from the historical mean.  We may see silver stalling while gold plays catch up.  We are in a buying hysteria and short squeeze in silver.  During these times it has historically been wise to sell into euphoria.  When the herd begins exiting it may be painful…the pigs wanting the top may get slaughtered.  Stay to my daily intelligence report tuned as these parabolic moves must be monitored.

Related gold and silver ETFs: SPDR Gold ETF (NYSE:GLD), Market Vectors Gold Miners ETF (NYSE:GDX), Market Vectors Junior Gold Miners ETF (NYSE:GDXJ), ETFS Physical Swiss Gold Shares (NYSE:SGOL),  iShares COMEX Gold Trust (NYSE:IAU), iShares Silver Trust (NYSE:SLV), ProShares Ultra Silver (NYSE:AGQ), ProShares UltraShort Silver (NYSE:ZSL).

Written By Jeb Handwerger From Gold Stock Trades  

ABOUT: I started reading charts at eleven years old. One day my father, a market trader and technician found his library of books on technical analysis mysteriously disappearing. He later found the textbooks under my bed. For many years day and night I studied technical analysis and charting, working and learning from my father who has over 50 years of trading experience. Technical analysis is my passion and love. In 2001, I started noticing the junior mining stocks and gold as having a tremendous upside. For the past 9 years I have researched many juniors and have identified the major winners using technical analysis and finding top management.

I earned a Bachelors Degree in Mathematics and a Masters Degree. I learned most of my technical analysis from the school of hard knocks, managing real money for myself and for my family. Constantly perfecting my craft, I have traded for two decades of success in many different markets. I have been asked to post ideas to some of my students who have taken my course in charting and technical analysis. I have made an excellent living trading stocks for myself.

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