Traders and investors also look at moving averages while making market entry or exit decisions. Usually, if a stock is trading below its 20-day or 100-day moving average, it’s an indication that the stock is oversold. Similarly, if a stock is trading much higher than its 20-day or 100-day moving average, it indicates an overbought position.
In this part of our series, we’ll see what the technical trend says for silver miners.
Silver miners’ moving averages
All silver miners are currently trading above their respective 100-day moving averages but below their 20-day moving averages.
The table above shows the moving averages, forward target prices, and returns of five silver miners.
Relative strength index
As the RSI (relative strength index) approaches the 70 level, it means the asset may be getting overvalued and is a good candidate for a fall in prices. Likewise, if the RSI approaches 30, it’s an indication that the asset may be oversold and will likely become undervalued.
Based on September 2, 2016, closing prices, most silver miners are trading very close to their oversold positions. While Coeur, PAAS, and Hecla Mining (HL) have 14-day RSIs of 37 each, Silver Standard Resources (SSRI) is trading closer to the oversold level at 31.
Although technical indicators mean there could be a short-term bounce back, investors should note that markets can remain overbought or oversold for extended periods.
Silver prices have risen since the beginning of the year. This trend has led to more leveraged names such as Coeur and Hecla to outperform the silver miners’ index (SIL).
The current oversold situation is also apparent in GDX and the iShares Silver Trust (SLV). GDX and SLV are trading 11% and 3%, respectively, below their 20-day moving averages.
Having looked at the technical parameters for silver miners, let’s next look at silver’s fundamental valuations and see the potential upside or downside.