Silver miners have finally chosen a direction. After we noticed several false breakouts followed by false breakdowns, especially around summer time, silver miners are now going sideways.
Readers will remember how we said that silver miners were confusing both bulls and bears. This is how the silver mining stocks evolved this summer:
It’s Official: Silver Miners Break Down, Look Very Bearish For 2017 (August 2017)
Silver Miners Starting To Break Down, Bearish For Precious Metals (July 2017)
Silver Miners Confusing Bulls And Bears (June 2017)
The false breakouts and breakdowns lead to a new pattern: a consolidation. A consolidation is a sideways trading pattern which suggests the market is trendless. There is not enough power by bears nor bulls to push a market in a certain direction. That is also what this writer in SeekingAlpha suggest when he says that silver miners are “comatose”.
On Barron’s we read that “gold has outperformed mining shares so far this year, but the tide may turn in coming months if mining companies report strong results and optimism rises over the outlook for precious-metals prices.” While that may be true we just observe that sideways pattern, and simply believe that the sideways trend will continue … until it is broken.
Things become very simple for investors now. There is a very clear breakout point and a very clear breakdown point:
- Silver miners break out once SIL ETF moves above 37 points, and stays there for at least one week. That would make silver miners bullish.
- Silver miners break down once SIL ETF goes below 32 points, and stays there for at least one week. That would make silver miners bearish.
Until a breakout or breakdown occurs there is no reason at all to engage in this sector.
