Going Back into Silver

[dobedo]

What would be a good reentry point for silver? $30? $20?

[tamo42]

Depends on your time frame. If you are holding as a long term hedge against dollar devaluation, I'd buy small lots all the way down, then purchase aggressively once things head back up (probably a month or two). If you are looking for a quick trade, wait until the bottom is found.

[tamo42]

I was just perusing the news. Looks like the major catalyst for the gold and silver sell off was leaked news that CME was going to hike margin rates for the 47th time. The hike came through on Friday, so that's that.

After a sharp plunge like we've seen, don't expect gold and silver to go right back up. But in the long run, all the same market drivers are still in place. Monetary inflation is still raging, and eventually the market will remember that even though American monetary inflation now looks to be lagging other banks' monetary inflation.

[buynicething]

If you are looking for a quick trade, wait until the bottom is found.

Maybe a dumb question, but what would be the indicators that we have found the bottom?

[tamo42]

Maybe a dumb question, but what would be the indicators that we have found the bottom?

Not a dumb question at all. Fundamentally, I'd expect to see consolidation in the price levels. Consolidation is when there is a lot of trading in a very narrow range. So after this big drop, I expect silver to bounce around a while wherever it ends up. The traders with losses have to be weeded out psychologically before new bulls can come in.

Indicators are secondary to price action, but I like to look at a series of moving averages (including MACD), volume trends (actual volume and OBV), ATR, and various oscillators like RSI.

[buynicething]

Does the consolidation period have an average time frame?  Or is it widely varying?

[tamo42]

It just depends on the circumstances. If you want some heavy reading, check out Richard Arms' books on volume analysis.

[buynicething]

Thank you for the information Tamo.  I will make sure to keep the notify on for this topic.  Your analysis here is highly interesting.

[tamo42]

Always happy to share!

[tamo42]

LOL, here you go dobdeo:

Silver will be above $45 before November 30, 2011

Wynter Benton is claiming that silver will be back above $45 shortly.