Gold And Silver Mining Stocks Potentially Building Bearish Flags

by Olivier on February 7, 2011

Going through lots of charts in the precious metals sector i.e. gold and silver mining stocks, I cannot help but notice lots of flags with potentially bearish implications if they are resolved to the downside. There is no need to predict anything here. The situation is unclear, that’s why I will simply wait until the technical picture becomes much clearer. The picture is really mixed. Silver and SLV the silver ETF look rather good, on the other hand quite a few stocks look extremely vulnerable right now. AUMN – Golden Minerals which recently displayed falling knife type trading behaviour is a good proxy for the type of weakness I am seeing right now:

AUMN Golden Minerals AMEX Bear Flag Silver Mining Stock Technical Analysis Price Target Chart Pattern

Up-to-date AUMN – Golden Minerals chart on my public list.

AUMN which was considered a leading stock due to its stellar performance, until recently that is, now has quite some trouble gaining traction again. As noted in the chart annotations, there is zero volume on the recent move to the upside. Therefore odds for the pattern to be a bearish flag are rather high as counter-trend moves tend to be printed on declining volume. In any case, I still expect at least one more move to the downside including capitulation type volume to shake out a few more traders still holding the stock.

Conclusion: Overall I believe downside potential to be rather limited. Percentage wise I don’t expect a huge move. Nonetheless, I am not interested in buying stocks still looking to find a bottom. The amount of overhead resistance that has developed is also starting to be more and more of an issue. I don’t care if the precious metals go up or down from here. What I can control though is my entry timing. I simply wait for the sector to show its hand and give me clear signals. Then I reevaluate. Patience is the name of the game.

Quand un économiste vous répond, on ne comprend plus ce qu’on lui avait demandé. – André Gide

My public list with all my charts can be viewed here:

Buenas noches!

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