Time to Take Some Profits on Silver

[Money Trends with Andy Krieger]( Welcome to Money Trends! If this is your first time reading one of our issues, learn more about us [here](. And if you have any questions or comments, shoot us a note anytime [here]( or at feedback@andykriegertrading.com. Time to Take Some Profits on Silver By Imre Gams, Editor, Money Trends One of the best lessons I’ve learned over the years is to follow these three rules on every trade: - Lessen risk - Eliminate risk - Protect open profits Whenever you get to stage 3, you have a winning trade on your hands… not a bad position to be in at all! And that’s exactly the position we find ourselves in with silver. In the [August 3 issue of Money Trends]( I wrote that after a hot rally that kicked off in July, silver was likely due for a significant correction. Just four days later, silver put in a significant top. It has declined over 27% since then. In that article, I used Fibonacci retracement levels (a trading tool you’ll hear me mention often) to forecast where silver might top out. Looking at silver in real time, I am using Fibonacci levels once more – combined with some other tools – to decide it may be time to take some profits on this trade. Let’s take a look at silver’s chart on the daily timeframe. If you’ve been reading Money Trends, you’ll recognize our usual Elliott Wave labels on the chart: the numbers 1-5, and the letters A, B, and C. This labeling assumes this sell-off is correcting a bullish market, and that the bullish market may resume shortly. Remember, the A-B-C designation is always used for corrective patterns. For those that may be bearish, this is a conservative perspective. It assumes any further potential downside is limited before the market begins to trade higher once more. Of course, I could take an incredibly bearish view here, but as a trader I always like to assume the most conservative perspective I can. I would rather be pleasantly surprised by my trades going on to be massive winners than to consistently strike out because I am swinging my bat with all my might trying to hit home run after home run. Still, this has turned out to be a very nice trade indeed… and I am not ruling out the potential for further decline. The technical evidence, however, is strong enough for me to recommend taking some profits off the table, or otherwise protecting your shorts by lowering stop loss orders. Let’s now examine this evidence together. To do that, let’s take another look at the chart I showed you earlier. You’ll notice we have a clear supporting trend line, drawn in red. This trend line has contained the entire rally from the end of March onwards. Yesterday, silver pierced through the bottom of this line in early morning trading before shooting back above it. This suggests to me that this trend line is still to be respected. Besides that, we’ve also completed almost a 50% correction of the entire rally. As a percentage decline, this is more than enough to serve as the entirety of a correction. Also take note that prices began bouncing near the end of Wave 4. Corrections will often travel to and/or end within the area of the previous Wave 4. One more piece of evidence that silver may have found support here is that the Relative Strength Indicator is giving us an oversold reading. You can see this indicator at the bottom of our chart above. (It’s the smaller chart below our main price chart.) Finally, we have great proportionality between waves A and C. What do I mean by that? In many A-B-C corrections, Waves A and C tend to be nearly equal. In this case, Wave A declined $6.41, while Wave C declined $7.24. The current relationship is close enough that we can check the box for this guideline. Individually, none of these pieces of technical evidence would convince me to take a tidy profit at this point. But taken together, it’s enough for us to take some money off the table here… while still leaving the door open for another potential move lower. A way to do this easily is to take a partial profit and then place a stop loss order below the original entry price. This means that even if silver decides to rally hard, we’ll walk away with a nice gain. Regards, Imre Gams Editor, Money Trends --------------------------------------------------------------- Like what you’re reading? Send your thoughts to feedback@andykriegertrading.com. [Money Trends with Andy Krieger]( Andy Krieger Trading 55 NE 5th Avenue, Delray Beach, FL 33483 [www.andykriegertrading.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This email was sent to {EMAIL} because you subscribed to this service. 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