Gold, Silver And Miners In Stage 1 Accumulation Mode

We don’t hear much about gold and silver anymore on the news. This time last year you could not go 5 minutes without a TV or radio station talking about them. Why is this? Simple really, precious metals have been building a Stage 1 Basing Pattern for the last 12 months. This boring sideways trading range is how the market gets most of those long holders out of an investment before it starts another move up. The saying is “If the market doesn’t shake you out, it will wait you out”.

We all know time is money so the above statement makes a lot of sense doesn’t it? Instead of having your money sitting in an investment that has clearly displayed a large sideways range with months and possibly years before any significant breakout will occur, why would you want your money in it doing nothing? There are other opportunities which you could be putting your money into that could generate more gains until the precious metals sector sets up with a high probability trading pattern.

The good news is that gold, silver and precious metal miner stocks are forming a very large Stage 1 Accumulation pattern on the weekly chart. This points to a multi month rally in prices if they break out above our resistance levels.

Gold and Gold Miner Stocks Weekly Analysis:

The chart below shows a lot of analysis. To the untrained eye, this may look messy and confusing, so take your time to review it. In short, what I am showing are sideways price patterns using the previous highs and lows for support and resistance levels. The analysis shows the shift in prices from Bearish (down), to Neutral (sideways). The exciting part about this pattern is that a new bull market should emerge if my analysis is correct. Now, I’m not talking about a 5 -10% move here, I’m talking about a multi month and possibly a yearlong rally in precious metals that could allow some individuals to retire early if played properly…

A break above our red dotted resistance lines should trigger aggressive buying in gold miners along with physical gold bullion.

In the past month I have been giving out some of my Stage 1 trading ideas which have generated some decent gains for those who follow along. All but one have generated gains with First Solar (FSLR) 12.5%, Facebook (FB) 12%, Research In Motion (RIMM) 54%, Apple (AAPL) 5%, iShares Barclays 20+ Year Treasury Bond ETF (TLT) 2.5%, Utilities Select Sector SPDR (XLU) 1.5%, and Market Vectors Coal ETF (KOL) down -5.2%.

Silver and Silver Miner Stocks Weekly Analysis:
This chart of silver and silver miner stocks (SIL), shows a very similar pattern to that of its big shiny sister (Yellow Gold). Silver carries a lot more risk because of its industrial usage. Also, this commodity is thinly traded and can move very quickly on a daily basis compared to gold. Because of these quick price movements it has attracted a lot of speculative money which also has increased volatility. More often than not silver will move 2-3 times more on a percentage basis than that of yellow gold.

Battle of the Miner ETFs Weekly Performance:

This chart compares three precious metals miner ETFs (GDX – Gold Miners, SIL – Silver Miners, NUGT – 3x Leveraged Gold Miners).

Silver miners have held up the best because the herd saw how big the move was a year ago and are front running the next potential rally. But, depending on how you read the charts and sentiment it may be pointing to the dormant gold miners for a bigger than expected rally.

However, debating which one will break out and run the most is a conversation/debate of its own and even I can argue both sides. The safe play is that even if gold miners (GDX and GDXJ) underperform the silver miners (SIL), the NUGT which is 3x leveraged gold miners should be the same if not outperform silver miners.

Precious Metals and Miners Trading Conclusion:
In short, I favor trading the miners over physical bullion simply because the charts show much more profit potential than if one was to buy the bullion exchange traded funds GLD and SLV.