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How to Trade the Silver Pullback

By Jeff Clark
Tuesday, March 11, 2014

Silver suffered a nasty pullback on Friday.
 
The last time we looked at silver, we pointed to the potential for a significant rally. Since then, the metal popped almost 16% higher in just one month.
 
But for the past couple weeks, the price of silver has been bouncing back and forth between $21.50 and $22 per ounce.
 
That range broke down on Friday when silver dropped as low as $20.75.
 
The selling pressure continued yesterday. And this has some folks wondering if it spells the end of the silver rally...
 
Let's take a look at this chart of silver...
 
silver price per pound chart
 
Silver never made it to the $23 price target I pointed out back in January. And the recent turn lower creates some short-term concern.
 
Silver is now trading below its nine-day exponential moving average (EMA) – the blue squiggly line. That's the new resistance line on the chart. To resume its uptrend and get back into a bullish pattern, silver needs to rally back above the nine-day EMA.
 
Otherwise, the next support level is the 50-day moving average (DMA) – the red line, which is down around $20.36 per ounce. This is a reasonable downside target for the short term.
 
If you bought silver back in January based on our advice, the 50-DMA is your new "stop" price. If silver breaks below that level, sell your position, take your profits, and wait for another buying opportunity.
 
If you didn't buy silver in January, the next low-risk buying opportunity will happen if silver tests its 50-DMA. If it fails to hold that level as support, you can stop out of the trade for a small loss.
 
On the other hand, if support holds at the 50-DMA and bounces higher, you'll be onboard the silver trade for a potential ride up to the $23-per-ounce target – and possibly to the higher target near $25.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

"Gold and silver are getting all the headlines right now," Jeff says. "But there's another precious metal that has been quietly rallying this year... And it looks like it will soon steal the headlines from gold and silver..." Find out what it is right here.
 
"Finding, building, and operating a mine – and making a profit – is tough," Matt Badiali writes. "But as my longtime readers know, there's a way to profit off gold and silver mines without taking on all that risk..." Learn more here: The Best Precious-Metals "Mining" Stocks in the World.

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