Precious Metals: How Do You Like Me Now?

When metals were getting crushed over the last year, everyone hated them. When they bounced off their June lows, they loved them. That's just the way the market works. But now what? Do we hate them or love them?

I've been in the camp over the past 4-6 weeks that metals are just a mess and it's been best to stay away from them. And for the most part, that was a great call by me because I promise you I would have lost money getting chopped around in these things. But then this morning came around. I woke up to gold getting slaughtered and the more volatile Silver down, but not down as much? Really? Gold getting crushed and silver outperforming on Tuesday? That doesn't sound right....

Well it just so happens that Silver, not only filled the August 12th gap, but that level also represents the 61.8% Fibonacci retracement from the June to August rally. So it got me thinking. Time to participate in metals once again? I've missed these guys....

Here is the chart of the iShares Silver Trust $SLV:

As you can see in the chart, sellers showed up at resistance just under $20 on both July 22nd and August 9th. Guess what Tuesday's morning low was? Yup, the buyers came in just under $20. You really can't draw it up any cleaner. We have nice polarity at former resistance as well as a key fibonacci retracement that couldn't break.

This is just a clean easy trade as far as I'm concerned. We're in it against those lows. If we roll over and that support fails to hold, then all bets are off.

Now, as far as targets go, that's where this one gets tougher. I wish we had a clean price target where we can say, "ok once we hit that level, we'll take profits". But we don't have a clean level, so we're just going to take it one day at a time and gauge it's strength by watching it's day-to-day behavior.

I thought this one was worth mentioning. What do you guys think? Am I on to something?

Tags: $SLV $SI_F $GLD $GC_F