On the 11th April 2008 we took profits on Hecla Mining when we sold some of our stock for $11.79, today this silver stock has backed off to close at $10.12, a fall of $1.67 or 14%. We could now re-purchase Hecla at a reasonable discount in a space of less than three weeks.

The question though, as always, is the time right to make such a purchase?

This is what we said when we sold on the 11th April 2008:

“Our selling of Hecla has been mainly motivated by technical factors. We do not really see Hecla trading higher than its recent highs of around $12.50 in the short term, as it would take a substantial rise in silver prices to push HL through that resistance level and this is a seasonally weak period for precious metals. This is also the second time that Hecla has challenged this resistance so we could be witnessing a double top formation, a very negative signal.

We have taken profits at these price levels before, back in 2007 when we sold 50% of our holdings for an average price of $11.89, locking in profits of 50% and 125% from our past purchase at $7.93 and $5.27. A correction followed and we bought the stock back and signalled a BUY again at $9.27, getting an 18% discount on our shares.”

Our core position remains intact with these trades forming part of our trading account. On the surface it does not appear to be fantastically profitable to trade for a 16% gain, however if we can make this sort of trade four or five times in over a twelve month period, then our objective of doubling our funds has been achieved. This strategy is not for everyone but we hope to use it over the summer months to increase our capital base thus providing the funds required to capture a few bargains along the way.

This is Hecla’s chart when we sold on 11th April 2008:

As you can see we thought that it was meeting with some resistance and that the upside potential was limited.

Moving on to today’s chart we can see the following:

HL has now corrected back to its own 200dma.

The technical indicators have almost hit the floor.

We do get berated for banging on about the importance of the 200dma but if you look at Hecla’s chart you can see that the stock price has returned to take tea with the 200dma no less than four times in six months, so there you go!

In conclusion we think that Hecla could still go lower but the downside is now limited as the sell off has almost worked itself out. The possibility of a bounce is now on the cards so a quick ‘in and’ out trade should generate a small profit.

A lot, of course depends on silver itself, however silver has been sold down from $21/oz to around $16.15 as we write. So again we think that silver is also due a bounce as bargain hunters return to this volatile patch, which would serve as a boost to silver mining stocks in general.

We are still watching this one but feel sure that a buying opportunity is close.

Remember that we are looking for a short-term speculative profit so do not go too mad on this one if you do decide to buy now..

Have a great weekend.

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