Today I would like to look at the charts for both gold and silver in order to determine the price action. Knowing this price action can help us know whether or not we should be buying or selling gold or silver. One of the first things we need to look for is to identify the direction or the trend the chart is moving.
Let’s look at the daily chart for gold. There are a few things that we can look at to help us determine if the price action is bullish or bearish. We need to avoid the urge to look right at the indicators and focus on the more critical item of seeing what the price is doing. If a price is going up then the momentum is bullish and if the price is going down the momentum is bearish. If we want to use something to help better visualize this we can look at a moving average or we can draw trend lines to help us identify this momentum.
Take a look at the chart below where we have placed a 40 period SMA along with some trend lines to help visualize the price action.
Notice on the far right hand side of the chart that the price has been moving down over the last couple of months. Currently, we can see that the price has jumped up in today’s trading to bump into the 40 period SMA along with the downward moving trend line. Seeing the price at this level should make us think that it could do 1 of 2 things. First it could drop back down in the direction of the trend to move lower. Second, it could break through and begin a move back up again. We don’t know for sure, so we will wait and watch for signs of either movement.
Now let’s take a look at the daily chart for silver. Notice the similarity between the gold chart and the silver chart. This chart also shows downward or bearish momentum with the price action. The moving average is also pointing down and the trend line is moving lower. As with the chart of gold we would look for some opportunities to trade this either to the up side or down side depending upon what we see happening. In the end we should not care the direction as long as we are trading with the direction it is moving.
As we look for opportunity’s to trade gold or silver we want to first identify the price action by looking at the direction it is headed. Then we can use things like the moving averages and trend lines to help us better visualize this price action. Once we identify the direction it is moving we will then know whether we should be buying or selling.
Take some time to practice looking at price action, moving averages and trend lines to help you better identify the direction to trade both gold and silver.