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 American (NASDAQ: PAAS) below with added notations:
Over the past month or so, PAAS has fallen into a sideways trading range. While in the range, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.
The PAAS rectangle pattern has formed a resistance at $17 (red), which has also been prior support, and a $15 support (green). At some point the stock will have to break one of the two levels.
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The Tale of the Tape: PAAS is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $15 or on a breakout above $17. The ideal short opportunity would be on a break below $15.
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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