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« Silver: Formed a base? | Main | Endeavour Silver Corp: Watch for Buying Opportunity »
Tuesday
May292007

SILVER: A Testing Time for Silver Stock Holders

Once again silver takes a breather and rests on its 200-Day Moving Average. This average has proved to be more or less silvers support area over the past few years, but will it provide that support as we enter the summer doldrums?

Silver Chart 29 May 07

From the chart we can see that silver over the last year has consistently managed to form higher lows when it has been sold off which is an encouraging sign as it indicates silvers underlying strength. You will also notice that the technical indicators are also in their respective negative zones, although not entirely on the floor. Silver may well go lower and take this indicators to the floor which would present us with a fabulous buying opportunity but at the same time it will be gut wrenching for those of us who are already fully invested in silver stocks.

It is almost the end of May so those that normally sell and run for cover are gone by now. And was the sell off devastatingly bad? No just a gentle pull back. However, having hit $15.0 last April it has been a long and frustrating twelve months of watching silver build steadily only to see it drop dramatically during in corrections wiping out most of the gains. Patience is required here as silver teases us regarding which way she will go. Try to remember that if we go back to April 2005 silver was trading at around the $6.0 level, so silver has doubled since then.

The next few weeks could see more of the same with silver churning at these levels giving us no clue as to where she is heading. However in our experience the longer the consolidation period lasts the bigger the breakout when it does arrive.

Finally we remain confident that silver will head north from this point and we will keep a firm grip on the silver stocks that we already own with the view to accumulating more should a suitable ‘Dip’ present itself.

On spikes we also expect silver to outperform gold so look out for silver ‘out doing’ gold through whip lash style movements which will drag silver stocks onto the lips of every analyst needing a career boost.

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