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What to Do If You Missed the Silver Breakout

By Jeff Clark
Thursday, August 23, 2012

Silver kicked off a new, explosive uptrend on Monday...
 
After consolidating in a tight trading range between $26 and $28 per ounce for the past two months, silver busted out to the upside. The precious metal jumped $2 in just three days. It was a dramatic move. And you had to be in the trade by last Friday to profit from it.
 
The obvious question today is, "What do I do now if I missed the silver breakout?" 
 
To figure out the answer, let's take a look at the chart...
 
 
 
As I mentioned on Tuesday, I think there's enough strength behind this move to ultimately challenge silver's April high near $33 per ounce. But the move over the past three days was dramatic, and silver could use a few days to catch its breath.
 
Silver is over-extended here in the very short term, and it's bumping up against resistance at $29.80. So this is a logical place for the rally to pause. And it's the nature of that pause that'll determine how to trade it from here.
 
It's normal for charts to come back down and re-test their breakout levels. In that case, patient traders can look to buy silver on a move back down near $28.30 or so. But strong breakouts like this – the kind that kick off important intermediate-term uptrends – usually don't make it easy for late-coming traders to get in.
 
Instead of pulling back, charts with strong breakouts simply waffle back and forth around the new resistance level for a couple days. Then they explode higher again... leaving patient traders in the dust.
 
It makes sense to nibble on a little silver on even just a small pullback over the next few days. There's more than $3 per ounce in upside potential. And there's about half of that in downside risk if silver comes back to retest its breakout level. So the risk versus reward setup is still favorable. And buying a little silver here – even after such a fast run higher – can still pay off well.
 
But hold back some ammunition just in case silver does retest the $28.30 price level. If that happens, consider it a gift from the market gods... and use it to take a full position in the metal. It may turn out to be your last chance to buy silver below $29 for a long, long time.
 
Best regards and good trading, 
 
Jeff Clark




Further Reading:

Gold is following the same pattern we've seen in silver this week. On Tuesday, Jeff called for a bullish breakout in the yellow metal… His timing was perfect. Gold is up 2% in just two days. Read more here.
 
Jeff says any drop in the U.S. dollar is a bullish sign for precious metals. And it looks as though the dollar is breaking down. See the chart here.

In The Daily Crux
Market Notes
Gold and silver funds are sitting at three-month highs.
 
Food prices are soaring... soybean, wheat, and corn prices are all up 30%-plus so far in 2012.  
 
Royalty trusts are stuck in a downtrend... San Juan Basin Trust and Permian Basin Royalty Trust sink 20% over the past six months.
 
Massive bust in electric car market... A123 Systems plummets 96% in less than two years.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1413.49 +0.0% +25.8%
Oil (USO) 36.22 +0.7% +10.7%
Gold (GLD) 160.54 +1.1% -13.0%
Silver (SLV) 28.92 +1.9% -32.2%
U.S. Dollar 81.53 -0.4% +10.2%
Euro 1.25 +0.2% -12.9%
Volatility (^VIX) 15.11 +0.6% -64.4%
Gold Stocks (^HUI) 454.44 +2.2% -24.9%
10-Year Yield 1.72 -4.4% -17.7%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 141.82 +0.0% +28.5%
S. Korea (EWY) 57.49 -0.2% +15.1%
Singapore (EWS) 13.20 +0.1% +11.8%
S. Africa (EZA) 66.75 +0.4% +8.7%
Taiwan (EWT) 12.74 +0.0% +2.8%
Canada (EWC) 27.74 -0.2% +1.7%
Lat.America (ILF) 42.89 -0.1% +1.4%
Japan (EWJ) 9.31 -0.1% +0.7%
China (FXI) 34.28 0.0% -1.3%
Israel (ISL) 11.97 -0.3% -10.6%
India (IFN) 21.35 +0.1% -14.1%
Russia (TRF) 14.69 +1.2% -14.6%

Sector ETFs
Symbol Price
Change
52-Wk
Construction (PKB) 14.68 +0.1% +45.8%
Retail (PMR) 25.23 +0.6% +40.4%
Big Tech (QQQQ) 68.43 +0.4% +37.6%
Consumer Svcs (IYC) 83.90 +0.3% +35.4%
Software (PSJ) 27.30 +0.2% +35.1%
Media (PBS) 15.80 -1.1% +34.5%
Industrials (IYJ) 70.29 -0.3% +30.4%
Biotech (PBE) 23.05 +0.7% +29.4%
Financials (IYF) 56.95 -0.2% +29.3%
Health Care (IYH) 80.84 +0.1% +28.9%
Real Estate (IYR) 64.94 -0.1% +27.1%
Defense (PPA) 19.82 -0.6% +26.4%
Water (PHO) 19.08 -0.3% +25.3%
Insurance (PIC) 16.59 +0.6% +22.4%
Transportation (IYT) 92.36 -0.5% +23.2%
Semis (PSI) 15.04 -0.7% +20.6%
Telecom (IYZ) 24.01 -1.0% +19.1%
Utilities (XLU) 36.83 -0.2% +17.5%
Basic Mat (IYM) 67.55 +0.8% +9.3%
Oil Service (OIH) 41.33 -0.4% +0.0%
Big Pharma (PPH) 39.54 -0.1% +0.0%
Nanotech (PXN) 6.26 +0.0% -5.0%
Alt. Energy (PBW) 4.31 -0.7% -29.5%

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