Greed never pays


In our last week´s silver chart book we suggested to rather take the gold short-term long play instead of the silver one. Both precious metals advanced as expected while silver actually outperformed Gold. Yet greed never pays!

Our call to rather take the gold play was the right one because it provided more options in regards to stop management!

Looking at the daily silver chart, buying on the 18th was equal to taking a triangle breakout play. One enters into a difficult zone with competing opinions and low liquidity. Risk is high and stops accordingly unfavorable.

At the same time a long entry in gold was still within the trading range. Here you could have positioned yourself into an anticipatory breakout to be followed the next day. In that case, tight stop placement was available and you would have found yourself comfortably in an established position for the following day´s breakout scenario. In silver however the entry would have been reactionary into a breakout zone and likely the stops would have been triggered.

Low risk focus over high return expectations

The lower 60 min time frame illustrates that exposed to the silver position, prices initially go mainly sideways. One most likely gets stopped out the next day, price movements penetrating entry price levels.

The 60 min time frame representation in gold on the other hand shows, how this low risk continuation play provided for nice profits. Risk was extremely low and entry prices never got revisited.

In exhaustion zones it is especially important to rather focus on the low risk plays verses the ones with high expectancy. If the overall market or individual instrument already are on their way into direction, conservative positioning is imperative.

One finds oneself easily correct in perception of advancing prices. This should not conclude so, that market participation is easy.

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