What Happens To Gold And Silver Next? Look Out Below?

You might like a short book I read recently Montana.

CNBC talking head Joe Terranova's brilliantly stupid title 'Buy High, Sell Higher'.

Quick read and spot on for what you are doing.

Buy the highs and let them go higher.

When they don't and the trend is reversed, then you sell. Sure you may give up a little of the gain waiting on confirmation of the reversal or confirmation of the uptrend, but 80 - 90% of the total bull run is more than sufficient.

Once you are in on a winner then you just let your winners win for you so to speak.



Another key point in that book and in this thread and that you seem to be realizing is discipline is key.

When you hit your stops you sell and cut risk.

You don't buy more because it is on sale.

No doubling down on losers.

You are buying winners and letting them win.

Keep it that simple.

.. when buying 52 highs go bad. Thats what I am calling this post.

The rule is, you BUY 52 highs. It never changes. However, sometimes the price starts to change, the facts change and this is where your stops go into play. The "facts" are only known to us by price, which happens in real time.

While not often, there are a few times where the price structure does change, and this is where paying attention to price gives you big clues that the trend is undergoing a change.

Let me give you two examples- soy beans




First up is soybeans. I am using the ETF to make things simple for my readers. I personally bought the 52 highs in soybeans back when it was in the 19s. This ETF ran higher so there was follow through. That was good as it did what it should from the 52 high break out.

But then, after hitting a few points after the 52 highs, soy beans started to break down, level by level. Take a look at the aqua colored arrows. Now look at range one. The first aqua arrow by the yearly highs, we can see that price TRIED to rally hard towards the 52 high. Two days later, it faltered.

Now look at the text that says range two. We can see that soy beans attempted another rally but once again, selling started up again and prices broke down hard from there.

The lesson? When you see ranges get broken down from yearly highs, that is a good area to start taking profits as we are getting some early warning signs. Often as range gets broken, prices end up hitting yearly highs. *typo* it should read (prices end up hitting yearly LOWS)





Next up is a chart for BMY, a pharmaceutical that had been hitting 52 highs and the price structure looked beautiful.

This stock has been hitting 52 highs for a while now. But then this past friday, it tanked very hard. Sometimes, a stock at 52 highs gaps down and on heavy volume. When this happens, you must exit. The volume and gap down are typical patterns exhibited when long term holders sold the stock and walked away.

This sort of price action is very damaging and takes time to resolve itself. Often it continues to run lower from here in due time. You must leave in these type situations, even if you are in a loss because your losses will grow even bigger over time.


So as you can see, SOMETIMES, in a trend, things happen. Occasionally, the trend, for whatever unknown reason at the time, changes. It is at these times where having a stop is important and key.

In financial markets, you ALWAYS use a stop in case the trend changes. This doesn't happen all the time, but because markets are dynamic and ever changing, you must prepare for some sort of change in trend or blow up. This is where taking the loss on your stop works.

So long as you obey your stops, you WILL come back and make up the loss, this I can testify too and guarantee. I can tell you from experience that I also have been in trades where an asset broke ranges BUT it did not hit my stop and ended up rallying hard and BACK at 52 highs.

So again, when things change, no matter what, ALWAYS pay attention to your STOPS. It is OK to get stopped out. As we say, its OK to be WRONG but STAYING wrong is NOT ok.

Montana, think hard about that $150 a month account.

I'd rather have the 1/10th ounce or so of gold that I could buy per month than a second trading account.

Not sure what an Elliot account is either. Some type of Elliot Wave analysis or something I am presuming?

Why lock in a $150 loss per month to experiment with some other system that may or may not work for you?

To me the number one thing you can do in investing is control what you can control, fees and taxes.

@ilikeikes

looks good, probably just tired. Made a fresh 52 high today but couldnt hold the break out, no surprise, its summer, August, most break outs are going to flop at this time of the year, no real market participants.

AG should continue to be fine. Still in good technical shape along with the vast majority of silver and gold miners.

@Yup,

I want to reiterate my appreciation for this thread.

I just received the Livermore book and now read it a few times. In one part, he talks about only making four or five commitments at all per year. In addition to PM, what are two or three other sectors you would recommend following (e.g., energy, cotton...)?

Also, Livermore never expressly mentions 52 week highs as his time frame. Do you ever use a different time frame like 26 weeks?

Finally, you talk about waiting for consolidation and then buying on the break. Is there a typically timeframe for this? Also, at this point, would you recommend not spending much time looking at prices until we either approach your ranges (e.g., $1376 or $1320)?

@BuckEye - As mainly a learning opportunity, I've subscribed to Gary Wagner's Gold Forecast. I didn't mean to be cryptic in my original post, but didn't think it necessary to mention specifically. I like to be able to learn his approach with current data each day rather than from a book looking at 2009 charts. Gary is a favorite of Kitco and often interviewed. Part of the reason for wanting to learn, Livermore specifically talks about gathering many data points (even to the extent of checking rail cars for capacity) although price action confirmation is most important.

@montanaCMR

no problem in helping out. I am trying here to help and tho will I realize everyone here is pretty new at understanding this, only will it be by time that one can truly understand how markets work and how it really is simple, one doesn't need to over think things.

Yes, this is true, make only a handful of commitments and scale up in size into them as they show you a profit and/or act technically sound. AGain the point is to keep things simple. Focus. Pay attention to price in those handful of positions.

I could talk my book here but I wont. However, I would suggest following commodities closely this year. Why?

1- Many, not all, are at yearly highs.

2- Commodity trends generally tend to run for years.

3- They are high beta, momentum movers. You can make a lot of money, provided you buy right and handle the violent moves, faster than the general stock market.

Here are some suggestions

You have your PMs, gold, silver, palladium, and platinum. Dont get other base metals, such as nickel are having a great year, good price action, trend is up.

In the softs you have cotton, sugar, for now.

The other area in the market that remains strong are recent IPO stocks that make 52 highs. The trend/market behavior has been that IPOs stock, for several years now, has been SOME IPO stocks are worth buying soon after they starting making 52 highs and then after a period of time walking away and dumping them.


The other ares depend on where the money is flowing. Remember, the market is ALWAYS changing, it is always dynamic. Nothing stays the same in the market. Sometimes trends run for a few weeks, months, days, years. Part of this comes down to what are the market conditions.

As an example, for about the past 18 months, I did very little trading because there werent really any appealing market leading sectors due to a market stuck in a range.

In another sector in a long term trend is the Aerospace/Defensive sector. This sector has been running for 2-3 years now and the stocks continue to run up. They have not been straight up but a steady grind up with pull backs.

Later I'll say more about how find the areas that are hitting 52 highs. I have repeated that before here but I;ll say it again.


I dont use 26 weeks. I am only interested in the following-

1- buying 52 highs

2- selling short 52 lows

3- playing the break of a range, to either buy or sell short.

So I'll play 52 high b/o or 52 low break downs. The reason for this is I am looking for the trend, Assets hitting yearly highs/lows is your undeniable confirmation of the trend.

I am not understanding your question about ranges/consolidation. There is no time frame for consolidation/ranges, because it is TIME itself that makes these ranges or consolidation to occur.

Each and every single asset will over time make a range or consolidate. Just take a look at the charts on this thread and you will see how every single chart shows a range. The ranges change from month to month, week to week etc.

Lets talk gold. It pretty much remains range bound with a high of 1377ish on the high end and the low end of the range is 1320ish. It has a few times tried to get above that 1376 but come up short.

This particular range has been running since about 6/24. One day this range or consolidation will be broken.

ALL assets trade in this manner, that is they swing in a range of price until, over time, they either break above or below the range. Some may move out of a range after months, some years and others may due it week by week.

In the case of gold, those ranges at the present remain in force and have not changed. And yes, until those prices are broken or reached, dont sweat what gold does. Just let the range solve and take it from there.

As an an example, a good place to BUY would be IF gold broke 1377.50, above that its making another yearly high. How you would set your stop on that depends on WHAT your objective or time frame as a trader is.


Conversely, if we broke the low end of the range and it stays below 1320, that would signal lower prices ahead for gold. It doesn't mean the up trend is done, just that prices are changing.

Back to looking for sectors to buy.

Those are a few areas to look at that come in consistently as of late I mentioned above. AGain, the market is a study in sectors, there is a lot of rotation, especially in stocks. Perhaps for a few months the food sector runs high along with say banks and real estate. However, after a few months, banks and food stop rising and go into a pull back or flat period while the food sector continues to run.

There is no way of knowing exactly whats going to run longest, except my learning/watching price and patterns. Experience over years helps, as you can see the same ole names usually rise up again and patterns remain the same, even after years of nothing happening.

The best way to cut down on some of this is by studying on the week 52 high list what are the strongest sectors, going by how many stocks are showing up in that sector. Pick from those names the sectors with most names. Dont be surprised that some stocks, even tho, being at 52 highs, are slower at moving than others. It happens.

This is where pattern recognition and really being a student of price works. This will take years of experience and patience, in this area there is no short cut.

Finally remember, there are times to be a buyer in the market and times NOT to be a buyer but a seller and then there are times to do NOTHING at all. The summer months are a good time to just observe but not really do much in size or at all, as an example.

I hope that helps.

@ilike,

Where did you read about this regarding Livermore? I read his book, but didn't see anything about 100%.