Seeking Alpha

edgetraderplus'  Instablog

edgetraderplus
Send Message
Michael Noonan Edge Trader Plus Michael Noonan is the driving force behind Edge Trader Plus. He has been in the futures business for 30 years, functioning primarily in an individual capacity. He was the research analyst for the largest investment banker in the South, at one time, and he... More
My company:
edgetraderplus
My blog:
edgetraderplus
  • Taking Stock Of Silver Stocks - SLW, PAAS, CDE, AG, SSRI, HL 0 comments
    Feb 5, 2014 8:40 AM

    Wednesday 5 February 2014

    We are of the simple opinion that any substitute for the real thing
    is never as good a choice as the original, even when it comes to
    Precious Metals. There are so many other considerations that enter
    the picture when regarding mining stocks. One of the primary ones
    is management, what it can do to a stock's performance separate
    and apart from its underlying purpose, silver production. There can be poor management, mismanagement, decision-making related to
    stock performance instead of getting the maximum performance out
    of its mining operations, overspending, misspending...you get the
    idea.

    Here is a reading of some of the top silver mining companies from
    a chart perspective. Charts show the best bottom line results from
    all observations one can make in an assessment of any company.
    While we see it as a way of cutting through everything else, this
    shortened version of viewing a company from a purely results-
    oriented perspective, via reading a chart, should not be quickly
    dismissed. In fact, from this kind of look, one might more easily
    see the value in dismissing some of the stocks as buy candidates.

    Another important consideration to be held in mind is to always buy
    strength over weakness. Do not buy a stock because it is low, and
    you think it may rally and play "catch-up" with the rest of the
    market. There are very valid reasons why any stock is weaker,
    relative to other companies in the same sector.

    In no particular order:

    However one wants to view SLW, the performance is slightly weaker
    to the metal itself. It is a positive that the last sell-off has taken 17 weeks to retrace the prior 9 week rally. The last 4 weeks on the
    chart show a clustering of closes. A clustering denotes balance
    between the efforts of buyers and sellers. From balance comes
    unbalance. A look at the daily chart may give a hint as to which
    way the unbalance will go.

    SLW W 5 Feb 14

    It seemed a little more positive on the weekly as the daily chart
    shows issues for buyers to overcome more than for sellers. The
    arrow points to an ease of movement lower, 8 TDs ago, [Trading
    Days]. Buyers have not been able to regain ground lost in a single
    day over the next 7 TDs of effort.

    The position of price, under a 50% retracement, is relatively weak.
    It does not mean that buyers cannot overcome resistance, but they
    have to put in a better show, now.

    SLW D 5 Feb 14

    We do not show the 50% retracement area for PAAS, but it is
    apparent from the eye that price is not even close. The gauging
    of how price is, using a 50% mark, is a general guide that demonstrates overall weakness, being unable to rally to that level,
    or strength, when price can rally to, and even exceed a half-way
    retracement.

    The sloping down trend line was broken, last July, but the breaking
    of a trend line is much less significant than overcoming a horizontal
    resistance supply line; the one at $14. The designation of an "Axis
    Line" is one where previous price support has now become one of
    resistance.

    PAAS W 5 Feb 14

    Here, you can see the validity of horizontal lines being significantly
    more important. The TR, [Trading Range], from last August led to
    a decline, so expect it to act as resistance whenever price rallies
    back to it. That rally occurred in January, and price encountered
    selling because those sellers who went short, last August, are
    defending their territory, as it were.

    What is positive about where PAAS met resistance, currently, is that
    price has not sold off as it did last August. It appears buyers are
    meeting the effort from sellers and preventing the market from
    going lower. Sellers have the edge, based solely on overall market
    conditions, so it is up to buyers to overcome sellers to gain control.

    PAAS D 5 Feb 14

    On the scale of relative strength or weakness, PAAS, for example, is
    stronger than CDE. Given a choice between the two, PAAS should be bought over CDE. Compare where PAAS is trading over the last
    several weeks, relative to where CDE is trading, and the concept of
    relative strength becomes very clear.

    Bearish spacing occurs when the last swing rally high is under the
    last swing rally low, and the two horizontal lines, one above 20, the
    last swing low from the end of 2012, and the line above 15, showing the last swing high. Whenever there is a space, it indicates a much
    weaker market because sellers did not need to wait and see how the last swing low would be tested. They were aggressively selling into
    the rally above 15, leaving the telltale space.

    CDE W 5 Feb 14

    The negative read on the weekly is amplified by the closer detail on
    the daily chart. It speaks for itself.

    CDE D 5 Feb 14

    The chart comments need not be repeated. AG is laboring. The
    inability to rally even above a 1/3 retracement speaks to the general weakness of this stock. Mention was made from the outset that
    reading a chart cuts through all other considerations, particularly
    fundamental ones, and gives a clearer picture of how a company is
    faring on its own, and more importantly, relative to other companies in the same sector.

    AG W 5 Feb 14

    Where are the buyers?

    AG D 5 Feb 14

    The swing highs and swing lows were connected to give a slightly
    different way of looking at how a stock is performing.

    SSRI W 5 Feb 14

    Where the weekly SLW seemed that it would lead to a more positive look on the daily chart, which the daily failed to do, SSRI has a more positive look on the daily than one might have expected from
    viewing the weekly.

    There is still some work to do for buyers to overcome sellers, but
    the direction of price, since the last swing low, is at least pointing
    upwards. How SSRI is able to recover from the recent sell-off, or
    not, will give an important clue in what to expect, moving forward.

    SSRI D 5 Feb 14

    Look at where price is, relative to resistance at the $4 level. This
    is another relatively weak performer and one that should raise
    questions as to why it should be bought, or even held.

    HL W 5 Feb 14

    The takeaway from this exercise is to 1. demonstrate the importance of the ability to read a chart, based solely on price and volume activity. Note that no reference was made to any mechanical
    technical tools, like RSI, Moving Averages, etc. They are not
    accurate as to timing, and if not, why bother with them? 2. The
    importance of relative strength when assessing whether to buy one
    stock over another within the same sector, or even buying in one
    sector relative to another one that is clearly performing better.

    The objective is to be profitable, and the above analysis has
    provided examples of how one goes about improving one's effort
    in attaining that objective.

    HL D 5 Feb 14

    Themes: Silver, SLV, SLW, PAAS, CDE, AG, SSRI, HL
Back To edgetraderplus' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.