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Precious Metals: Silver, Gold, Gold Miner Stocks on the Rise?


It could be a bumpy ride as the market works on forming a top in April.

The past couple months investors have been focusing on the equities market, and rightly so with stocks running higher and higher. Unfortunately most money managers and hedge funds are underperforming or negative for the first quarter simply because of the way prices have advanced. New money has not been able to get involved unless some serious trading rules have been bent/broken (buying into an overbought market and chasing prices higher). This type of market is when aggressive/novice traders make a killing because they cannot do anything wrong, but nine times out of 10 that money is given back once the market starts trading sideways or reverses.

While everyone is currently focusing on stocks, it's important to research areas of the market that are out of favor. The sector I like at the moment is precious metals. Gold and silver have been under pressure for several months, falling out of the spotlight they once held for so long. Now that I've reviewed the charts, it looks as though gold, silver, and gold miner stocks are set to move higher for a few weeks or longer.

Below are the charts of gold and silver charts. Each candlestick is four hours, allowing us to look back one to two months while still being able to see all the intraday price action (pivot highs, pivot lows, volume spikes. and price patterns).

The four-hour chart is one time frame most traders overlook, but from my experience I find it to be the best one for spotting day trades, momentum trades, and swing trades that pack a powerful and quick punch.

As you can see below with the annotated charts gold, silver, and gold miner stocks are setting up for higher prices over the next two to three weeks. That being said, we may see a couple days of weakness first before they start moving up again.

Four-Hour Momentum Chart of Gold:

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Four-Hour Momentum Chart of Silver:

Daily Chart of Gold Miner Stocks:

Gold miner stocks have been underperforming precious metals for over a year already. Looking at the daily chart, I am starting to see signs that gold miner stocks could move up sharply at the trade down at support, oversold and with price/volume action signaling a possible bottom.

Daily Chart of US Dollar Index:

The US Dollar Index has formed a possible large head-and-shoulders pattern, meaning the dollar could fall sharply any day. The size of this chart pattern indicates that if the dollar breaks down below its support neckline, we should expect the dollar to fall for two to three weeks before finding support.

Keep in mind that a falling dollar typically means higher stock and commodity prices. If this scenario plays out, then we should see the market top late April, which falls in line with the saying "Sell In May and Go Away."

Precious Metals Conclusion:
Looking forward two to three weeks, precious metals seem to be setting up for higher prices as we go into earnings season and May. Overall the market is close to a top, so it could be a bumpy ride as the market works on forming a top in April.

Editor's Note: Chris Vermeulen offers more content at his site,
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No positions in stocks mentioned.

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