Silver Stock Outlook Sterling
The stocks of North American silver companies, almost across the board, are in a very bullish position as we head into spring. After a rocky 1998 punctuated by a selling climax late last fall, most listed silver stocks are in superb shape and show clear signs of being accumulated in anticipation of a silver bull market. Indeed, the silver bull is already underway as prices for the white metal have risen dramatically in recent weeks due in large part to a voracious demand for silver coins among Y2K investors. This widespread demand won't soon be exhausted but should intensify as we near the critical Jan. 1, 2000 date. Let's examine some of the more bullish silver stocks. Apex Silver [SIL.AMEX] has a chart showing a classic "rounding bottom" accumulation pattern, indicative of insider buying. Since last October, when Apex registered a very sharp "V-bottom" spike that signified the end of its summer slide, demand for this stock has been steadily rising as evidenced by the ascending demand (support) line on its chart. Currently trading at $9/share, Apex must decisively overcome $10 resistance before issuing a full-blown buy signal. However, chart action for this stock has been sufficient enough to convince us that Apex is headed higher and investors would do well to accumulate shares now. Strong chart support for Apex is found at $8.
Avino Silver and Gold [ASM.V] bottomed last July at the $0.5 level. Since that time the chart shows a steady accumulation pattern has been underway. Of particular interest, we note that in recent weeks trading volume for Avino has risen conspicuously on up days—a bullish portent. Avino currently trades at $0.6/share. Significant overhead resistance is at $1, a level Avino should have no trouble overcoming in the near future.
First Silver [FSRTO], currently trading at $1.12/share, has one of the more gorgeous charts of all the silver stocks right now. A textbook perfect accumulation saucer-bottom pattern has been etched out in FSR's chart, punctuated in recent weeks by a rising demand (support) line. A nice scalloping pattern has also developed in First Silver's chart—a bullish sign. Demand for First Silver has clearly been rising in tandem with its stock price. A consolidation pattern has formed on the chart between $1.10-$1.20, and a decisive breakout above $1.20 resistance will send a clear-blue buy signal for this stock. We especially like the huge volume spike that appeared in February during its upmove—an undeniable sign of strong insider buying.
Grand Central Silver Mines [GSLM.NDQ] has the kind of chart similar to many of the Canadian gold mining stocks we have analyzed in recent weeks. Grand Central bottomed in January after a long decline that began last summer. A volume spike that accompanied a significant rise off its recent low at $0.75/share told us a new accumulation pattern was underway. Since that time Grand Central has traded more or less in a sideways congestion pattern but volume continues to betray insider accumulation. Watch this stock closely since we believe a major upmove is imminent. For the last several trading sessions this stock has traded in a lateral "flat line" pattern during which volume has dried up almost completely indicating a complete lack of sellers. Quite literally, this stock has nowhere to go but up and we anticipate a nice move to the upside soon. Another silver-related stock that isn't actually a mining company but whose prospects look very promising is Itronics Inc. [ITRO.OTCBB]. This young company specializes in gold and silver refining and technical services for the mining and recycling industries. After many years of struggling and base-building, Itronics has finally shown promise and its shares are being accumulated. In fact, its shares are being purchased by big-money portfolio managers and its outlook is sterling. We don't usually recommend a company based on fundamentals, but this one is an exception. The fundamentals—as well as the technicals—are rock solid for Itronics.
For mutual fund investors, the Lexington Strategic Silver Fund [STSLX.NDQ] is trading in a chart pattern very similar to the pattern the XAU itself shows on its chart. This sloping inverse head and shoulders pattern points to a reversal higher in the near future. With neckline resistance just under $3/share, a decisive breakout above this level will tell us it is time to enter positions in this fund, a well-respected one with a nice track record. Currently trading at $2.83, STSLX is within kissing distance of our buy target.
As we mentioned in a recent gold stock commentary, Pan American Silver [PAAS.NDQ] is one of the top candidates on our buy list among the mining shares. In our last analysis we wrote, "Pan American Silver [PAAS:NASDAQ] is a worthwhile silver play that is also undergoing insider accumulation. A consolidation rectangle has formed between $5-$6 and this base of support will ensure a solid upward move once $6 resistance is finally overcome. Once again, volume has been supportive of a bullish outlook in this stock and we envision an upside breakout anytime now. A 3% breakout above $6 will let you know to get on board for the ride to higher levels." Silver Eagle Resources [SER.V] also has a nice-looking chart. Rising demand, as signified by its rising resistance (demand) line on the chart, is a major reason this stock looks attractive to us. Furthermore, a bullish ascending triangle pattern can be seen on its chart with prices nearing the theoretical "apex" of the triangle. An upside breakout should be nigh at hand. A strong move above $0.2/share will let us know Silver Eagle's ship has arrived.
Clif Droke is the editor of the three times weekly Momentum Strategies Report newsletter, published since 1997, which covers U.S. equity markets and various stock sectors, natural resources, money supply and bank credit trends, the dollar and the U.S. economy. The forecasts are made using a unique proprietary blend of analytical methods involving cycles, internal momentum and moving average systems, as well as investor sentiment. He is also the author of numerous books, including most recently “Kress Cycles.” For more information visit www.clifdroke.com