Saturday, September 29, 2007

A Technical Look at Silver Stocks Part 2

If you feel that silver will rise, then probably the best way to capitalize on this opinion is to buy the silver ETF. However, I prefer to hold silver stocks, as there can be more leverage in doing so, and that way I don't have to convert my Canadian Dollars into US Dollars to buy the ETF.

The problem with buying silver stocks is determining which ones to buy. Ideally, there would be a silver stocks ETF, but since there is not, I have tried to find stocks that have a close correlation to movements in the price of the metal.

Two such stocks are Silver Wheaton, and Pan American Silver. I have only selected these stocks because they seem to move along with the price of silver, which is all I'm looking for. Here is a chart showing Silver Wheaton on the top and the price of silver on the bottom:

As you can see, this stock tends to move with the price of silver. Let's have a closer look at Silver Wheaton:

As you can see in the above daily chart of, the stock has formed a bullish island reversal pattern, in my opinion anyway. As well, notice that the RSI is not even close to being overbought, which cannot be said for most gold stocks.

However, this does not make this stock immune to a gold correction. Although not shown, the Gold Commitment of Traders chart looks much more bearish than the silver COT chart. Gold stocks can correct at any time now. These type of corrections are very difficult to time.

My plan is to keep holding the aforementioned silver stocks until their 9 day exponential moving average is broken on a closing basis. This method is much less stressful than attempting to get out at the very high of the move. Thanks for visiting this site.

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