Pan American Silver Corp., together with its subsidiaries, engages in silver mining and related activities. Its activities include the exploration, mine development, extraction, processing, refining, and reclamation of silver mines. The company owns and operates silver mines located in Peru, Mexico, Argentina, and Bolivia. It also produces and sells gold, zinc, lead, and copper.
Take a look at the 1-year chart of Pan (NASDAQ: PAAS) below with my added notations:
Over the past 2 months, PAAS has created a key level of support at $17 (green), which is also the “neckline” for the stock’s head and shoulders (H&S) reversal pattern. Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S would occur if PAAS were to break the support, and lower prices would be expected from there.
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The Tale of the Tape:: PAAS has formed a head & shoulders pattern. A long trade could be made at $17 with a stop placed below that level, but ideally, the pattern implies a short trade to be entered on a break below that level instead.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
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