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TECHNICAL ANALYSIS


Mixed Signals For Silver Standard Resources

12/01/04 07:53:45 AM
by Kevin Hopson

Despite the recent correction, the long-term uptrend still points to higher prices.

Security:   SSRI
Position:   Accumulate

Silver Standard Resources (SSRI) has been in a strong uptrend since early May, as illustrated by the one-year chart. Note how prices have traded within the bottom half of the black pitchfork over the past six months. Unfortunately, the bottom black parallel line -- which has acted as ultimate support for the stock -- has been tested significantly in recent days. When a support level is tested too much, it will usually break down in time. However, prices penetrated the bottom black parallel line earlier this month and proceeded to recover. As a result, a breach of support along the sliding purple parallel line -- or warning line -- around $13.80 would be needed to confirm a breakdown.

In the meantime, the short-term trend is down. This is best illustrated by the red pitchfork (top parallel line), which has capped prices since early October. Despite this, the stock is showing signs of strength. More specifically, note how prices recently tested the top red parallel line. Because the stock failed to test the red median line before testing the top parallel line, which is known as the "price failure" rule, prices should eventually break out of the red pitchfork. In other words, the longer-term uptrend still points to higher prices. As a result, buying on weakness could prove to be advantageous.

Figure 1: Silver Standard Resources. SSRI has been in a strong uptrend since early May, as illustrated here.
Graphic provided by: StockCharts.com.
 
More specifically, if the stock breaks the purple uptrend line around $13.80, there is a nice confluence of support in the $13.00 to $13.20 range. This is the site of the bottom blue parallel line and the bottom green parallel line. In addition, short interest (as of November 8) was 3.24M shares, or roughly 5.3 times the stock's average daily volume. This means there is a lot of potential buying pressure to fuel the stock. As a result, I would look to accumulate shares of Silver Standard Resources in anticipation of higher prices long term.



Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

Glen Allen, VA
E-mail address: hopson_1@yahoo.com

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Date: 12/01/04Rank: 3Comment: 
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