Zak Mir on Searching for Silver

2 mins. to read

Emboldened by the way that my “buy silver” pick in the latest Spreadbet Magazine is so far holding its own (see here on page 54 –, it appears an appropriate time to take a look at some of the key silver stocks…

The relationship between a precious metal and associated equities can be something of a moveable feast, with the rewards for getting on board a stock ahead of a bull run in its associated commodity being potentially monumental. As was mentioned in my monthly pick, this leverage to the upside for mining companies involved in silver extraction is particularly favoured at the moment given how, in many instances, costs of production are well above selling prices and have been so for quite some time.

Starting off with Fresnillo (FRES) and the Mexico focused group continues to present a complex technical picture on the daily chart. In particular, the complexity comes not so much from the way that we were on the receiving end of a September – March inverted head & shoulders but from last month’s breakout attempt from this bullish formation, which turned into a 200 day moving average failure at 921p. This would now suggest it may take quite a period of consolidation before the Fresnillo share price is able to fulfil its upside destiny.

Ideally, the scenario which could be seen over the next few weeks would be a rebound from above the July support line in the price window and the January support line down to 35 in the RSI window. The upside could actually surprise even more positively for traders in the sense that if 800p plus is maintained we should be looking at not only a clearance of February’s 1,000p plus peak, but also a retest of August’s 1,300p peak. The timeframe on such a move could be as soon as the end of June.

For my money Aquarius Platinum (AQP) has been in focus in a happy way from the bull perspective ever since the April bear trap rebound from below 18p and the accompanying gap to the upside. The way that this gap through 19p was filled later last month, and then followed by a higher low for May to date at 20p completed what should be a significant extended reversal.

The message now is that at least while there is no end of day close back below the initial April 22p neckline resistance one could anticipate a top of November rising trend channel target as high as 27p over the next 4-6 weeks. The break back above the neutral RSI 50 level to stand at 58 currently can be regarded as an extra positive for the long argument in the near term.

Finally, Hochschild Mining (HOC) is a combined silver and gold miner where like Fresnillo, described above, we could be looking at the right hand side of an inverted head & shoulders chart pattern. Such an idea is helped along by the way it is possible to draw an uptrend line from December through 147p – the intraday low of May 12th.

The implication is that while there is no end of day close back below this feature the recovery argument appears robust. This would pencil in a target as high as the October resistance line projection at 220p as soon as the end of June – if this situation “flips” to the upside with any revival in precious metals.

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