Thank you for joining us in a technical look at charts of INK CIN Index member Silver Standard Resources (SSO) and the price of silver.
If there has been a commodity that has shined bright during the last three months of market turmoil, it's silver. It has been trading in a sideways consolidation pattern between $13.50 and $14.50 since mid-November.
Despite heavy volatility in North American markets and the severe draw-downs equities suffered in the first three weeks of January, silver simply has not flinched. Instead, the precious metal has begun to move stealthily in an upward trajectory over the last 10 days. In the last few sessions, the metal has made higher lows, and has even climbed up and over its 50-day moving average. What's also interesting is that its RSI and MACD momentum indicators have been climbing gradually since late November. A major key here is that silver's RSI is now over 50 (54.68) and with today's nice green candle, it could be preparing for a sizeable rally. Minor resistance is at $14.40 and major resistance is at $14.60, and, if it can break through those levels, it could head for $15.20, its 200-day moving average. Minor support is $14 and major support is at $13.50-$13.70.
And with silver's very intriguing chart in mind, we are going to turn our attention to major silver producer Silver Standard Resources, one of many stocks thrown overboard during a stormy start to 2016. This much is true: Silver Standard is down 40% from a year ago and nearly 25% from the start of January; its recent chart looks ragged, and from a sentiment point of view the stock is looking as out of favour as ever. However, if we look even farther back on a 1-year chart, we can see two interesting points about the company. First, we can see that its lowest point in 2015 was in early March at $5.22 and the stock bounced significantly from the low $5 area where it finds itself once again today. Not only did Silver Standard bounce last March, but it went on to double, reaching a high of over $10 per share less than 8 months later.
Another interesting observation is that its RSI has rarely fallen under 30 (as it has today, with a reading of 29.66) and the two times it did in the last year, the stock has risen strongly soon thereafter. Those sub-30 RSI events occurred at the March 2015 lows (after which it climbed 30% in a month) and a second time in November 2015 when Silver Standard rose 20% in less than a month. Its minor support is at $5.50 and its major support is $5.25.
One last bullish technical note is that there is a supportive downtrend line (noted in yellow) that has marked the lower end of the stock's channel since August and the fact it supports the stock's price today lends further credence to the possibility of a rally from these levels.
If silver continues its impressive show of strength, investors might do well to keep Silver Standard on their radar.
This article first appeared January 25, 2016 for subscribers at INKResearch.com.
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