One quality silver junior that is looking outstandingly attractive here is Magma Silver which recently acquired the Ninobamba high-sulfidation silver project in Peru where Anglogold, Bear Creek, Newmont and Rio Silver have undertaken exploration in the past and discovered significant quantities of gold. The company is moving forward with an exploration program this Fall which could clearly act as a catalyst and as we will now proceed to see, “Smart Money” has already cottoned on to this and has been aggressively and persistently soaking up all the available supply around current levels, taking advantage of the low price resulting from the severe decline from the early June peak above C$0.25.
On the 6-month chart we can see how the severe decline from the early June peak brought the price down to bottom at just 8 cents in the middle of June. The stock tipped into a classic high-volume “capitulation” selloff during the 1st half of August as the “weak hands”, increasingly distressed by the seemingly unending drop, mindlessly dumped their holdings into the low but over the past several weeks Smart Money, aware of the extreme undervaluation, have been falling over themselves to get as much stock on board as they can at these silly prices and we are fast approaching the point where there will be no more stock available in this price area so anyone who wants it will have to raise their bids, a situation that will clearly be exacerbated if silver breaks out above $50 and accelerates to the upside as expected.
A shorter-term 2-month chart enables us to see to advantage that a fine dainty little Cup & Handle base has formed since early August whose early part or left side was formed by the capitulative selloff with heavy Smart Money buying forming the right side of the Cup and the Handle of the pattern with the steep climb in the Accumulation line just over the past week a sign that selling in this area has now been almost completely absorbed, which means that higher prices are ahead. This small Cup & Handle base may turn out to be an “island bottom” if the gap down into it at the start of it is complemented by a gap breakout out of it shortly, which is viewed as quite likely and if this happens, such a move is likely to be on high volume. A breakout from this pattern will therefore be signaled by a closing of the earlier gap and a close above C$0.14 and the uptrending MACD indicator that is now above its moving average shows a high probability that this will happen soon.
Zooming back out again now via a 2-year chart enables us to view several more interesting points. The first is that the decline from the June high brought the price down to a support level towards the bottom of the large range that it has been trading in for the past 2 years. The second point is that it makes clear that the persistent heavy upside volume over the past several weeks is far greater than anything we have seen over the past 2 years and is very bullish, especially as there are still only 34.3 million shares in issue. Lastly and importantly this chart reveals that while silver has doubled in price over the past 2 years (silver is shown at the top), Magma has barely moved, so it has a lot of catching up to do.
The conclusion is that Magma Silver is regarded as a strong buy here for all timeframes and it is considered to be worth going overweight on this one like we did with Guanajuato Silver
which has almost doubled since we bought about the 25th August, making exactly the big move that was predicted for it.
Magma Silver website
Magma Silver Corp., MGMA.V, MAGMF on OTC, closed at C$0.12, $0.085 on 12th September 25.
Posted at 8.30 am EDT on 14th September 25.