I had my fair share of emotions (fear) when I realized that silver has dropped to $27 for a period of time. I was thinking whether the bull run has indeed ended. My thoughts: “Should I really sell this time? Will it drop to $20??”
I told myself to calm down. The worst time to sell is when everybody panicked and sell. I just felt that the drop in price was really too fast. Too fast too furious and it looked manipulative in my opinion.
In the end, I just hold on to it and didn’t sell.
A lot of investors are using moving average as a guide to sell and the invisible hands know it. If the invisible hands really want to manipulate, they need to push the price down very dramatically in order to “force” everybody to sell (just my own personal theory). So when the price cut below 200-day MA, hell breaks loose. Everybody wanted to sell and get rid of their silver holdings NOW.
Take a look at the DAILY chart below. Silver has formed a hammer candlestick and it has a very LONG lower shadow. The sellers capitulated and sell at the lowest. The bulls then came back in to buy again at the end of the day. Weekly chart also showed the same thing, with a very long hammer. Normally a hammer will follow by a reversal.
If you take a look at a longer time frame – MONTHLY chart, you can see that silver actually is still in a long term up-trend. The support line is drawn in blue by me.
The support is at about $28. The last red bearish candle still close above the support. So I guess the bottom should be around $27-28 (if the uptrend is still intact) and the price will reverse soon in that case.
Big red candle means the last wave of sellers. Then follow by a big green candle “piercing up”. This is call a piercing pattern candlestick pattern. It shows that selling has stopped and people are coming in to buy again.
Then for a period of time, silver price was in a consolidation phase, moving up and down between $28-$29. After which the price broke past the resistance. I monitored a bit longer to make sure it wasn’t a false breakout. After confirming…. I went in to buy at about $30.
Isn’t it a good time to buy when silver price dropped from $40 to $30? It’s cheap! I bought when people are scared to buy.
At point of writing, the price is at about $30.80.
Of course, my analysis and judgement might be wrong and silver can drop back to $27 or even lower today or tomorrow.
To make sure I can get in and get out fast, this time round I am using CMC to make the silver purchase. Staying nimble and cut loss if silver dived again.
I am just sharing my analysis on how I am using TA to make a judgement and a decision to enter into a position.
I can be wrong so please don’t follow whatever I said. Make your own independent judgement.
It all boils down to the same thing again: “IF I AM WRONG, WILL I BE ALRIGHT?”
I know I can stomach the risk…and I am always prepared to be wrong (so that I don’t lose my underwear too!)
All of us bought silver at different price, have different profit target, have different risk-appetite. You know yourself best!
I think this episode is an extremely good experience to thoroughly understand the way you feel and how you react to your EMOTIONS.
A never ending learning journey for our investing path ahead!