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September 27, 2010 / Jeb

Gold and Silver Overbought, Due For A Pullback

In these articles I mentioned a target of $21 by the end of the year.  Right now silver has reached that target after making an explosive move higher.  Silver has made a 15% gain in 5 weeks.  I have found having targets and taking profits at overbought conditions is crucial in a trading strategy.  As a trader it is of primary importance to understand long term trends and in a bull market to add to positions when they are on sale and take profits when it is receiving a premium.  Using oscillators to determine warning signals to buy and sell are extremely helpful but needs to be used carefully.  Breakouts could lead a momentum indicator to stay at an extreme ratio for an extended period of time which is the case for silver and gold at the moment.

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