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Reading the Top Gaining Silver Miners’ Technicals

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Volatility

Undoubtedly, silver has outperformed gold this year. While gold has seen a year-to-date rise of 24%, silver has seen a rise of 33.3%. The past month was, however, not beneficial for either of these metals, as fears of an interest rate rise intensified. Gold fell by 2.7%, while silver fell by 9%.

Silver’s volatility compared to gold’s is considerably high. Gold’s historical call-implied volatility was close to 16% on August 26, 2016, while silver’s was 26%. This means that silver is more vulnerable to market changes than gold.

The Velocity Shares 3X long Silver ETF (USLV) and the ETRACS CMCI Silver Total Return ETN (USV) have risen by 109.9% and 30.5%, respectively, year-to-date.

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Let’s look at the implied volatility figures of silver mining companies First Majestic Silver (AG), Coeur Mining (CDE), and Hecla Mining (HL). These three silver miners have call-implied volatilities of 66.4%, 68.1%, and 60.1%, respectively. Call-implied volatility measures the changes in an asset’s call option with respect to the variations in the asset’s price. During times of global and economic turbulence, volatility is higher than in a stagnant economy.

These three miners have seen the highest gains among all the miners making up the VanEck Vectors Gold Miners ETF (GDX).

RSI

The RSIs (relative strength index) of mining shares have been falling as prices have slowly been retreating. The RSIs for these three giant miners have also fallen considerably.

First Majestic, Coeur Mining, and Hecla saw RSI levels of 29.7, 43.7, and 38.3, respectively. An RSI level of above 70 indicates that a stock has been overbought and could fall, while an RSI level of below 30 indicates that a stock has been oversold and could rise.

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