With gold limbering up to storm through the $1400 barrier into a powerful new bullmarket, silver must of course follow suit. That is why we are seeking to mop up the best gold and especially silver stocks while they are still available at near to rock bottom prices, a situation that isn’t likely to last much longer.
One undervalued silver stock that has been badly beaten up by a combination of weak silver prices and a run of bad news, the latest being a capex (capital expenditure) overrun on one of its new developments, is Fortuna Silver Mines. However, as subscriber Fred rightly points out “It is a producer that I think still has a very sound growth story / sound finances.” That of course is the case around current weak silver prices, so what happens when gold breaks above $1400 and silver rockets higher? – I think you get the picture – as with many mining companies that have implemented stringent cost saving measures in recent years, the benefits of rising metal prices will go straight through to the bottom line.
Now to review the charts. Starting with Fortuna’s 6-month chart, we see that it made the same “Downside Head Fake” breakdown move that silver itself did in mid-May, when it broke down from an otherwise bullish Falling Wedge pattern. While it has not since reclaimed the territory of the Wedge, which is now closing up, it has built a small Double Bottom with upside volume increasing noticeably, and it just started to pick up out of the 2nd low of this presumed Double Bottom yesterday as other big silver stocks did well, a positive sign. With it having already staged a clear momentum breakout, this action looks like the prelude to a significant recovery move – and there is certainly scope for it given how oversold it is relative to its 200-day moving average. Taking all this into consideration, and the fast brightening outlook for gold and silver, and bearing in mind that we are well aware that moving averages are still in bearish alignment, this looks like an excellent entry poimt for Fortuna here.
The longer-term 4-year chart makes it more clear how undervalued Fortuna is here, for it shows that as recently as mid-2016, it got above $9.50 – and that was without gold breaking out of its giant base pattern. It also shows that Fortuna of making big moves in the right circumstances, and the right circumstances are what is expected to prevail soon.
The conclusion is that Fortuna Silver Mines is a strong buy here for all timeframes.
Fortuna Silver Mines
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Fortuna Silver Mines, FSM, FVI.TSX, closed at $2.53, C$3.36 on 13th June 19.
Posted at 8.30 am EDT on 14th June 19.