NEW YORK (TheGoldAndOilGuy.com) -- We don't hear much about gold and silver anymore on the news. This time last year you could not go five minutes without a TV or radio station talking about them. Why is this? Simple really, precious metals have been building a stage 1 basing pattern for the last 12 months. This boring sideways trading range is how the market gets most of those long holders out of an investment before it starts another move up. The saying is "If the market doesn't shake you out, it will wait you out."
We all know time is money so the above statement makes a lot of sense doesn't it? Instead of having your money sitting in an investment that has clearly displayed a large sideways range with month and possibly years before any significant breakout will occur, why would you want their money in it doing nothing? There are other opportunities which you could be putting your money into that could generate more gains until the precious metals sector sets up with a high probability trading pattern.
The good news is that gold, silver and precious metal miner stocks are forming a very large stage 1 accumulation pattern on the weekly chart. This points to a multi month rally in prices if they breakout above our resistance levels.
Gold and Gold Miner Stocks Weekly Analysis:
The chart below shows a lot of analysis and to the untrained eye this may look messy and confusing, so take your time to review it. In short, it shows sideways price patterns using the previous highs and lows for support and resistance levels. The analysis shows the shift in prices from bearish (down), to neutral (sideways). The exciting part about this pattern is that a new bull market should emerge if my analysis is correct. Now, I'm not talking about 5% to 10% move here, I'm talking about a multi-month and possibly a year-long rally in precious metals that could allow some individuals to retire early if played properly...
A break above our red dotted resistance lines should trigger aggressive buying in gold miners along with physical gold bullion.
In the past month I have been giving out some of my stage one trading ideas which have generated some decent gains for those who follow along. All but one have generated gains with
Research In Motion
iShares Barclays 20+ Year Treas Bond
Utilities Select Sector SPDR
Market Vectors Coal ETF
down 5.2%. Keep in mind that you can follow my trading charts live for free and get some of my stock and ETF trading ideas here:
Silver and Silver Miner Stocks Weekly Analysis:
This chart of silver and silver miner stocks, shows a very similar pattern to that of its big shiny sister, yellow gold. Silver carries a lot more risk because of its industrial usage. Also this commodity is thinly traded and can move very quickly on a daily basis compared to gold. Because of these quick price movements it has attracted a lot of speculative money which also has increased the volatility. More often than not, silver will move 2 to 3 times more on a percentage basis than that of yellow gold.
Battle of the Miner ETFs Weekly Performance:
This chart compares three precious metals miner ETFS (
Market Vectors Gold Miners ETF
Global X Silver Miners ETF
Direxion Daily Gold Miners Bull 3X
Silver miners have held up the best because the herd saw how big the move was a year ago and are front running the next potential rally. But, depending on how you read the charts and sentiment it may be pointing to the dormant gold miners for a bigger than expected rally. But debating which one will break out and run the most is a conversation/debate of its own and even I can argue both sides. The safe play is that even if gold miners (GDX and
Market Vectors Junior Gold Miners ETF
) underperform the silver miners (SIL), the NUGT which is 3-times leveraged gold miners should be the same if not outperform silver miners.
Precious Metals and Miners Trading Conclusion
In short, I favor trading the miners over physical bullion simply because the charts show much more profit potential than if one was to buy the bullion exchange traded funds GLD and SLV.
The market seems to be setting up for some very large moves in 2013 and members of my trading newsletter should do very well.
At the time of publication the author held no positions in any of the stocks mentioned.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.