Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

High Volume Distribution In Silver, Molycorp Loses Steam

|Includes:SLV, SLW
aaronbasile.wordpress.com/2011/04/20/high-volume-distribution-in-silver-molycorp-loses-steam/

As silver made another new high after gapping up on the open today, there was still large amounts of selling intraday in SLV as well as some of the mining stocks, the most obvious being SLW which is a benchmark silver stock and one that many institutions own because it is a large cap dividend stock.

I believe that this action supports my claims that silver is overextended to say the least. We know that there is going to be massive resistance at $50, but the large funds and institutions will be sellers before it gets there leaving retail investors with the bag at the top. Let’s take a look at some of the distribution that’s been going on recently:

There is a lot of buying at the top going on if you ask me. The volume for SLV today was the 2nd highest of all time though I have to ask – does this look like a good time to be buying? We gapped much higher this morning and closed above the upper bollinger band for the 5th consecutive day.

Huge distribution took place during the middle of the trading session.

SLW has been stuck in a trading range since the initial breakout a month ago. Given the rising price in the spot market, this benchmark silver play should be at $50 or so by now. Notice the large distribution days that have taken place as the price has been stuck in a trading range despite the increase in the price of physical silver.

SLW reversed intraday behind large distribution volume. This is critical because the flagship silver play needs to be confirming the out of control spot price.

Moving on, MCP may have broken the trendline that followed the breakout above $50 a few weeks ago. My stop loss was hit today and now I’m watching this in cash. It doesn’t look like there is much more upside here in the short term and I’m satisfied with over 50% gains after buying in the $45 range.

MCP broke the trendline which extended from the middle of March. In addition, it closed lower than the 9 Day MA which before marked the end of the previous rally in December. The MACD encountered resistance and appears to be rolling over as does the RSI. The only thing missing from today’s action was substantial volume backing but I have a feeling we’ll see an exhaustion pop within the next couple of days before truly reversing lower. At this point, the risk reward favors sellers of this stock especially if you have profits from buying the previous consolidation which ended in March. I’ll most likely be looking to buy MCP or MCP calls when it becomes cheaper.

Stocks: IQ, SLV, SLW