We took a look at silver miners in early July as they had appeared to have stabilized and were ready to bounce. The metal and miners did indeed bounce from that area and have continued to firm up. This group remains as one of the few that are still in a decent position despite the recent market slide. While gold has surged ahead of silver, the latter remains in a decent position.
The metal as represented by the iShares Silver Trust (NYSE:SLV) ETF just cleared an important resistance level near $37.50. SLV had been confined to a tight range since the spectacular drop in May, and by clearing the $37.50 level, SLV may have put in an intermediate bottom. The $32.50 level has held on a few occasions, and now that SLV has set a higher pivot high, it can set its sights on the all-time high near $48. Traders should keep a close eye on the $37.50 area, as it should now act as a support level. Any close below this level would certainly merit caution. (For more, see Is Silver The New Gold?)
Endeavor Silver Corporation (AMEX:EXK) is a silver miner that has been quietly consolidating after a strong rally earlier this year. It recently cleared some resistance along with the metal in July, as it closed above first its 50-day moving average, and then a pivot high near $10.40. EXK remains in a larger consolidation and has been forming an ascending triangle pattern, with trendline resistance near $11. Any close above this level would be bullish, and may lead to new highs.
Great Panther Silver Limited (AMEX:GPL) has been trading in almost exactly the same pattern as EXK. It first cleared some resistance levels in late June and early July and after a shallow pullback, could be poised to break out of the triangle pattern it has been building. GPL found support near its 50-day moving average and a close above $4 could signal a breakout.
First Majestic Silver Corp. (NYSE:AG) is also close to breaking out of its consolidation pattern, although the base is flatter and closer to a rectangle than an ascending triangle. In the end, either pattern is simply a consolidation pattern and the underlying psychology behind them are the same. The $26 level would be the area to watch as a close above this level would put $AG in position to run to all-time highs. (For more, see Triangles: A Short Study In Continuation Patterns)
The Bottom Line
It's usually a good sign when an entire group moves in unison, as it usually has institutional money behind it. The silver miners are all basically shadowing the precious metal and with silver recently clearing some resistance, it could be setting the stage for a miner rally. This, coupled with the fact that the miners have held up better than most other sectors could be pointing to higher prices for the group. Traders should monitor how these stocks react to the top of their current bases, but any breakout above resistance could lead to a fast move higher. (For more, see Tales From The Trenches: Hindsight Is 20/20)
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.