How To Trade Silver and Silver Stocks
               More Safely and More Profitably

                            by William Schmidt, Ph.D. (Columbia University)
                                                     (C) 2008 All rights reserved.  Reproducing any part of this page without
                                                                       giving full acknowledgement is a copyright infringement.

------------- Tiger Index of 6 Silver Stocks -----------------

        Silver Stocks include:

            Silver Wheaton Corp. (NYSE: SLW),
            Helca Mining Co. (NYSE: HL),
            Coeur d'Alene Mines Corp. (NYSE: CDE),
            Silver Standard Resources Inc. (Nasdaq: SSRI),
            Apex Silver Mines Ltd. (AMEX: SIL)
            Pan American Silver Corp. (Nasdaq: PAAS).

  ------------- Silver and Gold Yearly Charts -----------------

        We are told that SIlver and Gold prices are manipulated.
    That's nearly always the case.  It begs the question of
    which direction do the manipulators want prices to
    take.  TigerSoft's Accumulation Index and Closing Power
    go a long way to answer this question.  Only TigerSoft
    offers these tools.

                Watch the Trend!
  TigerSoft's Closing Power's Trend Is Your Friend



       We are also told that a big Lehman Commodities
    fund is now liquidating its positions, hence the big sell-off.
    That helps explain the particular decline we see now.
    But it will not help us in the future.  It will be better to
    understand that precious metals swing violently much
    of the time, sometimes up and sometimes down.  Our
    job is to watch for the tell-tale signs of trend-reversals
    that occur in cycle afer cycle.  

            Lessons We Can Widely Apply To Trading
       Silver and Silver Stocks More Profitably.

     (1)  Silver and Gold Should Regulalry Be Compared with Crude Oil 
           and The Dollar    


              A rising Dollar hurts Gold and Silver.  A falling Dollar helps. 

              When crude oil prices rise, it puts pressure on the Dollar because
          of how much oil the US imports.  When the Dollar weakens, as it had
          for several years until this Summer, Gold prices rise as investors try
          to beat inflation.  While Silver is more a commercial metal, and can
          sag like crude oil because of a recession, it is also widely promoted
          as a hedge against a falling Dollar.  

      (2) Watch the Tiger Index of Foreign ETFs to spot the type of global
            economic weakness which will hurt the global demand for Oil
            and Silver.

            It is significant now that foreign ETFs (exchange traded funds that
            represent different countries' stocks) have broken below their
            support and are in a downtrend.  Demand for silver is waning.
            Gold usually holds up better in this environment.

           When the DJI cannot rally in the face of sharply falling oil prices,
            it is a warning about how eak the overall economy is.  As I finish
            this Blog this is alarmingly true. 

            TigerSoft predicted the world bull market was ending in November 2007 by seeing
            many head and shoulders patterns in foreign ETFs.
            http://www.tigersoft.com/Tiger-Blogs/11-22-2007/index.html  


        
           (3)  Precious Metals Have Recently Fallen Sharply.  


                A decline in metals' spot prices drops mining companies'
           shares to the extent that they have not hedged their selling prices.    

             In late July 2008, the Dollar (See below.) reversed its down-trend. 
          That was matched by gold and silver falling sharply.
          You can see that the quotient of the Dollar divided by Silver
          broke its downtrend a few days before the Dollar completed its
          reversal pattern and turned up.  Someone watching this chart closely
          would have been given advanced notice that Silver would become weak. 
          The fall in Crude Oil prices is a reasonable explanation for the rise in
          the Dollar.  But it works in reverse, too.  When the Dollar is worth more,
          it buys more Crude Oil.  It is quite probable that the Administration
          has orchestrated a rise in the Dollar and a concurrent fall in the
          price of Crude Oil, to make Republican chances better in November
          for the Election.  This also happened in the 3rd quarter of 1976, only
          to be followed a super rally in Silver and Gold when the Democrats
          came into office.

     ----------------------- US Dollar and Dollar/Silver -------------------------------------



     (4)  Use A Ruler To Spot Changes in the Direction of Commodity Swings 

                     Commodities tend to run together.  More and more hedge
               funds and mutual funds are trading commodity ETFs.
               That puts extra pressure on prices.  They have always had booms
               and busts historically.  Their advances very often come in
               big spurts.  Their uptrendlines are hyperbolic.  The chart
               of Crude Oil now shows how simple trendlines would have
               helped spot the points in time when prices changed direction.
               Since silver prices are historically very volatile, it is important
               not to fight their trend.  

                     I wrote a Blog on  3/21/2008 and talked about how silver is
          often manipulated on the short side with impunity.  Displaying
          all of Silver's charts since 1979, I showed that somone using
          just a ruler ought to be able to make money in it regularly.
          See these concepts and all the charts at
                http://www.tigersoftware.com/TigerBlogs/3-21-2008/index.html

     (5)  Use Downside Projections. 

          Classic technical analysis postulates that a breakdown from
          a trading range typically sets up a minimum downside objective
          that can be reckoned by supbtracting the height of the trading
          range from the point of breakdown.   Here the height of the pattern
          was "A", about 4.30 points and the point of breakdown was 16.
          That sets up a minimum downside objective of 11.70 with Silver now.

     ----------------------- Silver and Gold Prices -------------------------------------



        ----------------------- Crude Oil (Perpetual Contract) -------------------------------------

         Crude oil has sliced through its rising 200-day ma with negative
         (red) readings from the Accumulation Index.  This is bearish,
         though the fact that the (black) 200-day ma is rising usually means there
         will be a rally back to the point of breakdown of this ma.
 
             

     (6)  Use TigerSoft's Accumulation Index To Spot Reversals           


             Crude Oil is in many ways the key now to predicting Gold and
          to a lesser extent silver.   Experienced TigerSoft users know to
          watch our Accumulation index closely.  Bulges of Blue Accumulation,
          especially on a price breakout from a base, are very reliably
          bullish.  But after a long advance, a new price high that occurs
          with the Accumulation Index negative, or nearly so, is often making
          a significant top.   The July peak in Crude oil (above) showed such a
          bearish negative non-confirmation.   Similarly, we want to watch
          for new lows being made with the Tiger Accumulation Index positive,
          Newmont, a gold stock, illustrates this below.

----------------------- Newmont Mines (Gold Stock) -------------------------------------
 

             (7)  Use TigerSoft's Closing Power To Spot Reversals    

                There was another bearish aspect to Oil's advance into July.
           It was too quick.  It had "bubble characteristics" in the sense that
           both Tiger's Opening Power (public buying) and Closing Power
           (professional buying) were rising simultaneously.  This makes for
           an exciting climax in prices.   But when the Closing Power breaks its
           uptrend, it is bearish.   Traders will usually make money looking
           for these situations and going short.  See the Opening and Closing Power
           for Crude Oil in the chart below.

         ----------------------- Crude Oil (Perpetual Contract) -------------------------------------


          (8)  Study individual silver stocks like SSRI and PAAS for signs of red
          (bearish) distribution, (bearish) false breakouts, (bearish) head and
          shoulders tops and (bearish) violations of well-tested support.
          For more information on "false breakouts" see:
                   http://tigersoft.com/Tiger-Blogs/11-15-2007/index.html
                                        and
              http://www.tigersoftware.com/Breakouts/index.html
          TigerSoft predicted the world bull market was ending in November 2007 by noting how
               many head and shoulders patterns were appearing in foreign ETFs.
               http://www.tigersoft.com/Tiger-Blogs/11-22-2007/index.html

                  So long as the Accumulation Index is below its falling moving
            average and the Tiger Closing Power is falling, it would be best not
            to try to call a bottom.  Guarding capital should be the #1 rule for
            traders and investors.  

           ------------------------------------------- SSRI --------------------------------------------------------------

    
       --------------------------------------------------- PAAS -----------------------------------------------



           (9)  Study individual silver stocks like SSRI for important clues about
                  where professionals think the stock is headed.  A falling Closing
                  Power trend is bearish.  That the public is bullish, shown by
                  a rising Opening Power, is usually not enough to keep the stock
                  from falling. 

        ======================= SSRI ==============================

  
         ======================= PAAS ==============================


       
          (10)  Look at Weekly Charts To Find Support on A Steep Decline.

          Below are the 5-year charts of Silver, Pan-American Silver (PAAS)
          and Silver Standards (SSRI).   Earlier lows are commonly used to try
          to call a bottom.  But when prices fall very, very steeply, it may seem
          like calling a bottom in this environment is like catching a "falling knife".

                   
                            
 ----------------------- Silver Stock - PAAS -------------------------------------

                  PAAS formed a head and shoulders top with a neckline
                  at 30.  The height of its pattern was 43-30.  Taking the height
                  of the pattern, 12 points from 30, yields a downside price
                  objective of 18 using classic technical analysis techniques.
                  A rally back to 30 would then be a distinct possibility technically.
                  Traders would expect a rally of 33% to 50% of the amount lost
                  from the high to be recovered.

                                         
----------------------- Weekly Silver Stock - SSRI -------------------------------------

                  It is hard to be constructive about SSRI's technical picture.
                  It should find support at 20, but how much will it rally?  

                 The weekly chart of SSRI shows a bearish head and shoulder top.
                 The right shoulder displays negative (red) distribution.  The height
                 of the pattern is about 20 points highs.  The breakdown point
                 was about 25.  This too-simple approach warns that it could drop
                 back below 10.  Traders should understand that It is not
                 safe to buy until is breaks its price downtrendline.  And any rally
                 from 20 back to 25-26 should be used to sell, as a precaution.
 
 
     (11)   Use Gold Seasonality to Help You Look for Tops and Bottoms. 

             When Silver goes opposite to the direction expected by
              Seasonality we should certainly be cautious.  It should
              by seasonality be rallying this month, instead it is falling.
              The chart and the data below show how Silver did from 1973-2003. 
              Silver also rose in September each year, 2004-2007,  That means
              it advanced in September in 27 of 33 years.
            
            The 'Silver: September Increase' is the seasonal rise in silver, starting
                on August 30 and ending on September 23. The increase was observed
                in 24 of 30 years, resulting in an average profit of +8.2%. But there were
                also 6 years, where the price of silver fell during this period of the year.
                The average loss then was -5%. The overall rise during all 30 years was
                +5.4% p.a. 
                ( http://news.goldseek.com/GoldSeek/1061908537.php ) 

                     

                                         Silver 2004
                                       Silver was up.

             

                                          Silver 2005
                                        Silver was up.
             


                                       Silver 2006
                                     Silver was up.
                

                                       Silver 2007
                                     Silver was up.
             

                                  
       ======================================================

        Apply These Concepts to Another SIlver Stock, SLW