The Allure of Upswings in Silver Mining Stocks / Commodities / Gold and Silver Stocks 2019

Theentire precious metals sector rallied yesterday, but the upswing wasparticularly visible in case of silver and (especially) mining stocks. Both:silver, and miners moved to new October highs. Silver’s breakout was tiny, butminers rallied relatively significantly and that’s the part of the current longtrade that’s particularly profitable. Of course, these profits are near tonothing compared to what’s likely ahead in case of the big short trade that weplan to profit on in the following months, but they add their part to theoverall results. Please note that a small long position here also means stayingtemporarily out of the short position, which brings the likelihood ofre-entering them at higher prices.

Let’stake a closer look at what happened.

TheMiners’ Upswing

Goldminers rallied almost to their 50-day movingaverage and well above the previous October highs. Neither the RSI, nor the Stochasticindicators suggest lower prices in the near term. Still, let’s keep in mind howboth indicators are supposed to work.

The RSI is likely to tell uswhen the HUI Index is overbought on the short-term basis, and the Stochasticindicator is likely to confirm the trend’s reversal with its sell signal afterit already takes place. In this case, we don’t want to wait for the confirmationbecause of all the important factors that point to lower precious metals pricesin the following weeks. Conversely, we want to cash in the profits from thelong positions once the easy part of the rally is over. Is the easy part of therally over? Almost, but not yet.

Why?

Becausethe resistance line in gold was not yet reached, and because of the move above$1,500 and the neck level of the previous head-and-shoulders pattern as morevisible rally had been likely than what we’ve seen so far.

Therecent back and forth trading seems to be a flag pattern. This in turn tells usthat the move that follows the consolidation is likely to be relatively similarto the move that preceded the pattern. This suggests a moved to thelate-September high. However, let’s keep in mind that the declining resistance line also providesimportant resistance and gold might not be able to rally that far.

Inother words, a move to about $1,540 or so is still possible, but it’s not aslikely as the move to the declining resistance line that’s a bit below $1,530.The (hypothetical) part of the rally above $1,530 would no longer be “easy” –it would be risky. And it’s usually better to stay out of the risky trades,while focusing on those that are confirmed by multiple signals instead.

SilverOn the Rise

Yesterday’srally in silver was bigger than the one that we saw in gold, but not yet huge.This suggests that the rally might not be over just yet. The final days of therally are often characterized by huge outperformance of silver and that’s notwhat we saw yesterday. This outperformance is what usually makes people eagerlyjump into the market, believing that the white metal is taking off. But it’snot a rally bullish signal – it’s an ambush after which silver price starts todecline – often in a dramatic manner. Consequently, it seems that we’re goingto see a day or a few days of higher prices before silver drops once again.

Summary

Summingup, the big decline in the precious metals sector appears to be finallyunderway, but based on gold’s invalidation of the breakdown below thehead-and-shoulders pattern, a quick rally is more likely to take place in thevery near term. Most likely, the rally will be short-lived and it will end thisor the next week.

Dueto miners’ strength, we are moving the profit-take levels for them higher.

Oncegold reaches the predefined gold price target, we think it best (from the riskto reward point of view) to take profits off the table in case of the longpositions in gold, silver, and mining stocks, and open the big short positionin them that are in tune with the main trend.

Today's article is asmall sample of what our subscribers enjoy on a daily basis. They know aboutboth the market changes and our trading position changes exactly when theyhappen. Apart from the above, we've also shared with them the detailed analysisof the miners and the USD Index outlook. Check more of our free articles on our website, including this one – justdrop by and have a look. Weencourage you to sign up for our daily newsletter, too - it's free and if youdon't like it, you can unsubscribe with just 2 clicks. You'll also get 7 daysof free access to our premium daily Gold & Silver Trading Alerts to get ataste of all our care. Signup for the free newsletter today!

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
Tools für EffektivesGold- und Silber-Investment - SunshineProfits.DE

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