Silver? To Buy or Not to Buy, That is the Question
by Raghu Gallupalli, Contributing Writer
SLV, FSLR, JKS, TSL
In the past four trading sessions Silver has come off more 20%, leading some to believe that Silver’s bullish run is over. After all some of the world’s most savvy investors like George Soros and Carlos Slim have been selling their stakes in Silver.
Why the sudden reversal? Part of the reason is the new margin requirements instituted last week and the other part is Silver’s correlation to crude prices and the larger market.
I tend to think of this pullback as a long overdue correction for an investment that was getting a little too vertical for comfort. Or to be technical, Overbought.
This correction and the new margin requirements should drive the pretenders and speculators out of the market. This sharp move down will no doubt cause substantial panic among those who bought near the top allowing value investors an opportunity to take advantage. Silver is not just a precious metal but an industrial one as well. Being the top choice of solar companies (JKS, FSLR, TSL) for use as conductors.
A value investor could look to possibly invest in Silver in the days to come after the correction ends. But make sure it begins to trend upwards again before you enter the trade.
We never want to try to pick the bottom or the top, that is almost always a lose lose strategy.
That’s why its always important to have an intelligently adjusting risk strategy to protect your profits and minimize your losses. Using SmartStops.net, The short-term exit alert came on 5/2/11 at $43.60 for SLV. Given today (5/5) its trading at $35.78, that’s already a $7.82 per share protection of profits! If I see the trend starting to reverse and wanted to play this bounce, its then paramount to have my stops in place . SmartStops is showing that the optimized exit point for today’s market (it adjusts daily) for SLV in the short term is $36.69 and long term $33.53 dependent on my investment horizon.
Disclosure: Author has no positions in the mentioned symbols