Clive P. Maund
gold, silver, & oil shares


WHAT TO DO WITH YOUR SILVER STOCKS (that we sold before the correction)...

originally published June 21st, 2009

On the basis of the latest Gold and Silver Market updates, you probably know the answer to that one, which is to BUY THEM BACK. Our tactic of selling near the top a few weeks ago has certainly paid off as most silver stocks have backed off significantly, with the biggest ones such as Coeur d'Alene, Hecla and Silver Wheaton suffering declines of about 25%. It didn`t work with one or two of them like Silvermex, which position we reinstated last week at a higher price - certainly worth doing as it has since broken out and is now poised for a powerful advance. Late last week we were sensing an imminent end to the correction and started to move back into ECU Silver, taking advantage of its recent steep drop, in addition to buying Silvermex at about the same time. Then right at the end of the week we saw some really strong evidence of a reversal for on Friday the big silvers actually closed up, with several of them POSTING RECORD VOLUME. When we recall that VOLUME PRECEDES PRICE it is clear that this is a strongly bullish signal, not just for silver stocks of course, but for gold and silver themselves and for gold stocks, which did not, or have not as yet, shown such evidence of a big pickup in upside volume. It is interesting that this huge volume was most evident in what, up until now, can be described as the least "sexy" silver stocks, what we have referred to in the past as the "smokestack" silvers, the big lumbering old dinosaurs of the industry like Coeur d'Alene and Hecla Mining. Everyone already knows what a wonderful company Silver Wheaton is so it is already largely in the price, but stocks like Coeur and Hecla, because of their lack of appeal are thought to be undervalued and have considerable upside potential - you can see how much by taking a look around at what has happened to the stock prices of Freeport McMoran and Teck Cominco, for example. The old smokestack silvers have a high component of base metal production, but this may come to be regarded more as an asset than a liability, as has been the case up until now.

Selling off tranches of stocks periodically has one great advantage, in addition to the psychological advantage afforded by taking good profits before a correction, and that is that it allows one to rebalance portfolios in the light of the latest intelligence. While you could buy equal amounts, in money terms, of the stocks listed below, it makes more sense strategically to go overweight in the ones that we know look really good, without "putting all your eggs in one basket". Specifically, ECU Silver looks most attractive here because it's a great pure silver company and its stock has been sold down heavily over the past few weeks - we don't expect it to make a "rocket move" because of the high number of shares in issue, but can still look forward to solid gains. Hecla looks grossly undervalued and has a strong chart, and the stock has surprising leverage for a large silver at the current low price, it is preferred to Coeur d'Alene because its volume pattern and volume indicators are considerably more positive, although both should now go up. Silvermex looks very strong indeed with big gains in prospect, so we should definitely go overweight in this one. Fortuna, on the other hand, looks rather ambiguous and unpredictable, so we would probably want to be rather underweight here.


Coeur d`Alene CDE (CDM.TSX) $10.80

Couer has dropped by 25% since we sold it on 4th June, when the triangle that had formed in it was correctly diagnosed as a reversal pattern due to the anomalous and negative volume pattern within it. Before last Friday Coeur had suffered an extraordinary 10 trading days down in a row. While some would say that after 10 days down in a row it was entitled to an up day on Friday, and it therefore it was of little significance, we would disagree because there are 3 factors on the chart suggesting that it should now reverse to the upside. One is that the decline has brought it down to a point close above its 200-day moving average. The second is that a "spinning top" candlestick appeared on the chart on Friday, and one of these appears after a downtrend it is sign that the bearish forces have exhausted themselves - it was one of these appearing in the other direction after a strong rally in ECU Silver that signalled to us to get out before it fell heavily. Finally, while the drop last week was on persistent quite heavy volume, which is rather offputting, it was totally eclipsed by the huge record volume on Friday, which is taken to indicate Smart Money piling in once the selling has been overdone and a change of trend is due. Couer is accordingly rated a strong buy here and Traded Options may be attractive to experienced subscribers as a way to leverage gains. The rise on big volume in both Coeur and Hecla on Friday is further taken as an indication that silver itself is about to reverse to the upside.

Coeur was sold at $14.41 on 4th June for a 51% gain.


ECU Silver ECU.TO (ECUXF) C$0.62

We started tentatively buying back into ECU late last week, with an article on it being posted on the site on the 17th. Now, after Friday's bullish action in the sector, we can simply step up to the plate and boldly buy it back, much more confident that it will go up again from here. Positions sold early in the month at about C$0.85 can now be fully reinstated.

ECU was sold at C$0.85 on 3rd June for a 19% gain on its last upleg.


Endeavour Silver EDR.TO (EXK) C$1.87

Endeavour has dropped by over 20% since we sold it on 4th June. After that it plunged back to a point a little above its 200-day moving average where a small "spinning top" candlestick appeared Friday signaling probable exhaustion of the downtrend and an imminent reversal. With the stock now quite deeply oversold as shown by short-term oscillators, in particular the MACD histogram, which is at a reversal extreme, and the sector set to turn up, it's a good time for us to go long again.

Endeavour was sold at C$2.35 on 4th June for a 25% gain.


Fortuna Silver FVI.V (FVITF) C$0.95

Fortuna has made no net change in price since we sold it on 4th June. This is a stock that has been behaving oddly this year, for it did not rise when the sector advanced, but equally it did not fall when the sector corrected this month. If this pattern of behaviour continues then clearly it won't be of much use to us. However, on the 1-year chart we can see that it appears to be completing the long Handle of a Pan & Handle base formation, so it may be preparing to break out upside soon, the chances of which are increased by the fact that the 200-day moving average is now flattening out after falling for a long time and also by the volume pattern and volume indicators being quite positive. Thus it is thought likely that it will advance with the sector next time round and therefore it is viewed as attractive here.

Fortuna was sold at C$0.95 on 4th June for an 11% loss.


Hecla Mining HL $2.66

We ditched Hecla for a 61% profit in less than 3 months just as the correction started, which turned out to be timely as it has since dropped by a hefty 23%. As we can see on the positive looking chart below the reaction back to support was quite normal following the breakout from the fine Double Bottom base area which we capitalized on. Hecla is still an unloved stock, unlike Silver Wheaton, but that looks set to change, especially given the massive record upside volume in the stock on Friday. There is plenty of upside potential especially as there is no serious overhanging supply until it rises above $7 - $8. Positions should be reinstated and possibly augmented.

Hecla was sold at C$3.48 on 3rd June for a 61% gain.


Impact Silver IPT.V C$0.64

Impact has actually risen by nearly 5% since we sold it on 4th June, so in the event we didn't need to sell it, as it has bucked the trend and risen a little since we got out. It appears to be close to breaking out upside from a completing Pan & Handle base area, with breakout being signalled by a close about C$0.75. Once it breaks out it should perform well, although traders should note that there is strong resistance above C$1.50, and be ready to take profits once it approaches this level. Impact is therefore rated a buy again around the current price.

Impact Silver was sold at C$0.61 on 4th June for a 24% gain.


Minco Silver MSV.TSX $1.95

Minco has made no net change in price since we sold it on 4th June. The price broke out from a Pan & Handle base pattern early in May with a gap and accompanied by huge volume, which was a clearly bullish development. After rising for over 2 weeks following the breakout, it settled into a trading range that at first looked like a small Head-and-Shoulders top area, but since it has refused to break lower in recent weeks, this pattern is now regarded as a Triangle or Pennant. With the volume pattern positive - it is declining with time within the Triangle - it is expected to break out upside. This should happen soon given that the price is approaching the apex of the triangle and that the outlook for the sector is rapidly improving, and fits with the bullish outlook for the related stock Minco Gold, written up on the site last Friday.

Minco Silver was sold at C$1.95 on 4th June for a 66% gain.


Silver Wheaton SLW (SLW.TSX), $8.63

Silver Wheaton has dropped by 18% since we sold it on 4th June. After we sold it, it went into decline culminating in some savage down days last week which brought it very close to the lower support line of the uptrend channel in force since last December - January in a quite deeply oversold condition. On Friday it closed up on heavy volume, a positive sign that signals probable reversal, and it is now thought to have hit bottom, or to be very close to doing so and is therefore rated a strong buy here for renewed advance within and up across the uptrend channel.

Silver Wheaton was sold at $10.56 on 4th June for a 35% gain.


Silvermex SMR.V C$0.215

Silvermex was sold at $0.15 on 4th June for a 37% loss and bought back a few days ago at C$0.17. We got wrong-footed by Silvermex as after we sold it at a substantial loss, it actually went up while most other stocks corrected. It was featured in a report on the site last Thursday due to the exceptionally bullish volume pattern that developed this month, and the next day it broke out from a bullish Falling Wedge pattern on record volume, which can only have been partly due to our article. It looks very strong indeed here and is believed to be in the earliest stages of a powerful advance. With it still being available at an attractive price even after the breakout move it is rated an immediate strong buy.

Silvermex was sold at C$0.15 on 4th June for a 37% loss, and bought back last week at C$0.17.


Tumi Resources TM.V C$0.16

Tumi has dropped by over 11% since we sold it on 4th June. It has actually been in a reactionary phase since early May, within a larger uptrend that is believed to be still in its earliest stages. With moving averages swinging into increasingly bullish alignment and volume and volume indicators bullish, the stock is viewed as attractive around the current price. Note that Tumi is thinly traded at times.

Tumi was sold at $0.175 on 4th June for a 45% gain.


US Silver USA.V (CYLPF) C$0.175

US Silver has dropped by over 14% since we sold it on 4th June. The reaction has been modest compared to much larger silver stocks and has brought the price back to a support level near its rising 50-day moving average. Regarded as a buy here for a resumption of the larger uptrend.

US Silver was sold at $0.205 on 4th June for a 70% gain.


Finally it should be noted that two important silver stocks not in the above list, and which we have not followed in the recent past, namely Pan American Silver (PAAS) and Silver Standard (SSRI), also turned up on high volume on Friday, meaning that they should now rally. However, both these stocks are afflicted with a big supply overhang above the $25 level on both charts, which is why we are not so interested in them.

All prices are for the close of trading on 19th June 09.