Silver finally began a correction in late April after a parabolic spike through most of the beginning of the year. The correction was brutal over the first few days in May, but silver basically found some footing and started trading in a tight sideways range. In looking at the iShares Silver Trust (NYSE:SLV) ETF, one can see that the $32.50 level held on the initial down thrust and appears to have held as support on the latest test in late June. Volume has dwindled back to normal levels after a huge spike during the correction. While it is too early to know whether SLV is done correcting, it does appear ready for an attempt at a bounce. The first level to watch would be near $37.50 which has held as resistance on a few attempts. SLV looks like it is headed for a at least a test of this level. (For a related primer, see A Beginner's Guide To Precious Metals.)

Silver Wheaton Corp. (NYSE:SLW) is a silver miner that just survived its own test of support near the $30 level. SLW has been one of this group's leaders over the past few years. It understandably corrected along with the base metal after hitting new all-time highs earlier this year. SLW recently cleared a wedge it was following on the way down and is currently testing its 50- and 200-day moving average near $35. A successful break of this level could lead to a potential bottom being put in for SLW. (For more on trading silver, see Trading Gold And Silver Futures Contracts.)

Endeavour Silver Corporation (AMEX:EXK) is another silver miner that is attempting to find a floor. EXK came back to test the $7.50 level, which it had cleared earlier this year on its way to all-time highs near $13. While the correction has been steep in percentage terms, the structure has remained typical of a stock in an uptrend. The one thing to keep an eye on has been the increased volume throughout the base. This is typically a warning sign and traders will need to keep an eye on volume during any negative days.

Great Panther Silver Limited (AMEX:GPL) is another silver miner that could be ready for a rally attempt. GPL also had above-average volume during its recent consolidation, and did dip under a support level near $3. However, it rebounded off its 200-day moving average recently and is in the process of attempting to clear a trendline, marking the top of the channel it has been drifting lower in. It is also back above its 20 and 50-day moving averages and could be ready for an attempted breakout.

The Bottom Line
While Silver still has a lot of work ahead, the miners appear to be showing some relative strength to the metal. Neither can be safely assumed to have bottomed, but there are signs that an intermediate low may be in. Traders should closely monitor the recent lows as a line in the sand, and more importantly, watch to see how the miners deal with any selling pressure in the coming days. If selling pressure is light, the miners could attempt a move towards their recent highs. (For an intro to using relative strength effectively, see Momentum and the Relative Strength Index.)

Charts courtesy of stockcharts.com

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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