"Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions."
-
Sun Tzu

Tuesday, November 20, 2012

Silver Looks Good, But...

Yesterday, I increased my long Silver position after the prices confirmed a recent swing low. Long term charts look extremely bullish and one could argue that the metals (Gold as well) are resuming their long-term uptrends:

I'm more cautious: one has to be careful to not interpret too much into a chart. The human brain is great when it comes to pattern recognition, but it can also trick you and let you see things where there is nothing. Confirmation bias is one of the biggest enemies of a trader.

Here is a daily Silver chart with just a one year of price history:


I would argue that Silver is still in a trading range and as long as prices do not trade above $37, I would be careful arguing for a resumption of the long-term uptrend.

Since I have a position, I plan to take partial profits at the top of the range and then see how prices act from there. Will aggressive sellers emerge or will price stay at the top of the range or even blast right through it? I can't and don't have to predict what will happen, but I still can make money on this trade.