Mr Bob Moriarty of 321gold.com has famously said “If you won’t take a profit when you have it, that leaves one alternative – taking a loss.” Well, we certainly have a profit in Fortuna Silver Mines
, a 50% gain in just over a month, since we bought it at a very good entry point in the middle of June
, and it has spiked dramatically higher in recent days.
The principal driver for such stocks is of course the silver price, and, as we can see on its latest 8-month chart, silver has just hit both a trendline target and a target at resistance in an overbought state, making it very likely that it will now consolidate or react back for a bit, although the long-term outlook for silver remains excellent.
With an awareness of what has just happened with silver, if we now look at the latest 6-month chart for Fortuna Silver Mines, we see that it has “charged deep into enemy territory” by spiking way ahead of its 50-day moving average and past its still falling 200-day moving average to become overbought in a zone of resistance. This means it is vulnerable to a short sharp reaction soon or at least to a period of consolidation, and since we don’t like giving our hard-earned gains back to Mr Market, this looks like a very good point at which to take profits, with the aim of buying this stock back later.
There are various other silver ETFs and stocks that are very overbought on a short-term basis now where it would probably make sense to take at least partial profits and await developments, and on this list we have ProShares Ultra Silver AGQ, $27.99, VelocityShares 3X Long Silver ETN USLV $79.34, Endeavour Silver EXK $2.39 where volume reached climactic extremes yesterday, and Impact Silver IPT.V, C$0.38 where we have a nice profit after having bought it at a good price. Impact is very overbought at resistance. The remaining ones are not so overbought so it may be better to ride out any correction.
A very important point to make here is that the move that is starting in this sector is believed to be very big, so we have to be careful not to sell too early and miss much bigger gains down the line. We are only talking about tactical lightening up here with a view to buying back perhaps on a short sharp reaction.
Lightening up on some of these stocks does not mean that you have to be out of the game, for there are other stocks that haven’t moved yet, like Platinum stock Group Ten Metals PGE.V, C$0.16, which is powering up for a really big move and Roxgold Inc ROXG.TSX, C$1.09, which was written up just this morning on the site and is on the point of breaking out.
End of update.
Posted at 9.00 am EDT on 19th July 19.