Precious metals look like a correction with silver to take the bigger dip

04/27/2011 8:30 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Technicians are saying that we’re seeing what they call a climax top in silver. I think we’re in for some profit taking on both precious metals with silver facing the biggest drop. (Remember I’m not a technical analyst. Which is why I subscribe to several technical services.)

What’s a “climax top”? Technicians such as John Murphy (who writes one of the  pay-to-read technical services that I pay to read on Stockcharts.com) say such a top comes after a spectacular upward run and is characterized by heavy volume. Since the start of April, for example, Silver Wheaton (SLW) has been falling on rising volume. To take another example, iShares Silver Trust (SLV) has shown the heaviest volume in its trading history with the biggest volume during the day to the downside.

Gold and gold stocks are likely facing a correction too but they don’t look as over-extended as silver where the RSI (relative strength index) shows silver at its most overbought level in five years.

 

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