I had a few people recently ask about Silver and Gold. Here is a chart of Silver with two possible buy entries marked. As you can see the lower one was clearly the better entry than the higher one. In fact after the second one, the 5th bar after the breakout is actually a very good sell signal, trading back through the gap of the false breakout upwards.
How can we ever know this in advance? The answer is that you cannot. A great trader and friend by the name of Kevin Haggerty once told me that you should always buy at the lowest common denominator, translated, the lowest price setup. He feels that minimizes your risk.
So many people have fallen in love with the concept of diversifying into precious metals, which I feel is due to the media coverage these areas have gotten. One of my replies to someone recently was that Gold is setup better fundamentally to rally, but Silver has a more bullish chart pattern. These are both still true, but there is not a solid entry setup on a short term basis for these markets. Neither one of these markets has a pattern that I would buy here, especially Gold, which has been hit very hard the last couple of days. Silver, short term traders should have been short yesterday about halfway through the day.
Trade Location is of the utmost importance in making profits. Great ideas and bad timing will equal losing money. Make sure and try and take your bigger picture fundamental views and tie them into short term patterns that have the same bias. There are never any guarantees, but this will enhance your odds of success. Just because you think metals prices are going up, do not just run in and buy the futures or stocks blindly. Beware of "Location."