Once each week on BMR, our technical analyst will highlight one or more resource stocks (outside the BMR Portfolio) that show very favorable chart patterns. Investors/traders of course should perform their own due diligence and consider fundamental factors as well. This weekly feature is merely meant to introduce some possible opportunities that investors may wish to investigate. This morning, John takes a look at Mag Silver Corp. (MAG, TSX) which is certainly timely given the fact the odds of an upside breakout in silver have increased significantly over the past week. MAG is unchanged at $7 as of 7:45 am Pacific time:
The outlook for Mag Silver is very bullish in the short term but it must overcome the main resistance at $8.50.
John: After slumping from a 52-week high of $8.26 April 26, Mag Silver (MAG, TSX) appears to have bottomed and consolidated. On Friday it broke out of the consolidation to the upside.
Looking at the chart we see that a double top occured on March 25 and April 25. The stock then retraced 61.8% to a support level of $6.59 and consolidated for a period of 7 trading days (horizontal blue lines). Last Friday it broke out to the upside and closed at $7.
We can also see that it broke above its EMA(20) for the first time in nearly a month. The EMA(20) provided support during the stock’s uptrend from February 22 to March 25 – this is bullish.
Looking at the indicators:
This is not a high daily volume stock but the volume last Thursday was relatively high and the breakout occured on lower volume Friday. This is bullish.
The RSI has broken above the 50% level and is trending up – bullish.
The Full Stochastics %K (black line) has made a low definitive cross over the %D (red line) – bullish.
The Chaikin Money Flow (CMF) indicator has turned green above the zero line, indicating that buying pressure has overcome the sellers and is increasing.
Outlook: The outlook for Mag Silver is very bullish over the short term at least but it must overcome the main resistance at $8.50 to move toward its previous all-time high of $16.40. Watch for a possible increase in daily volume this week and a continued move to the upside.
