Silver Stocks vs. Palladium

By: Przemyslaw Radomski, CFA | Wed, Oct 31, 2012
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Before making any investment decision it's usually good to look at the situation from different perspectives and make sure that the action that you are about to take is really justified. In fact, the same is the case with any other decision as well. In the precious metals market the analysis of gold is usually supplemented by the analysis of silver and gold stocks. At times, analysts focus on other markets that often influence metals: currencies and the general stock market. Some look for hidden details in the analysis of ratios and at times they look at even less popular charts (on a side note, just because something is not popular doesn't mean that it's less relevant for the analysis).

Today's essay will feature two parts of the precious metals market that are covered relatively rarely: palladium and silver stocks. We will compare their performance and explain what each of them currently tells us.

Let's start with palladium (charts courtesy by http://stockcharts.com.)

PALL (ETFS Physical Palladium Shares) NYSE

On the above chart, we see further bearish indications that declines in precious metals prices are not yet over. A head-and-shoulders pattern completed here recently but palladium (PALL) has not moved close to its target level yet. Target levels are based upon the size of the head in the pattern and these patterns are usually quite reliable for this metal (as opposed to what we see on the silver market where significant head-and-shoulder patterns are practically nonexistent).

The implications here are bearish for the whole precious metals sector. Will this really translate into lower prices for mining stocks as well as metals?

We have already written that precious metals mining stocks may outperform the underlying metals in the weeks to come. Now we would like to analyze a chart that has never been included in our free essays before and that further reinforces our previous comments in this matter.

SIL (Global X Silver Miners) NYSE

The above-mentioned, new chart is the long-term Global X Silver Miners chart, an ETF (SIL) that resembles an index of large and liquid silver mining companies and hence it provides an insight into this sector as a whole. The silver stocks should provide confirmation or invalidation of points made in our earlier analysis of the palladium price. At this time, the silver stocks have a more bullish picture than any other part of the precious metal sector. The October 2012 correction is barely visible - actually, some sideways trading has been seen when silver declined, not a decline.

There really hasn't been a decline to speak of when compared to the moves to the downside for platinum, gold stocks and silver itself. Indications coming from volume are very strong as well, with higher prices accompanied by high volume and declines seen on low volume. All-in-all, the situation is very favorable for silver stocks and the rest of the precious metals with respect to the medium and long term -based on the above chart alone. This chart does not provide any short-term indications, though - at least we didn't find any meaningful short-term signs.

Summing up, the implications of the palladium chart for the whole precious metals sector are rather bearish for the short term, as the chart indicates that the current correction is not over yet. We have also seen a confirmation of the strength of the precious metals mining stocks. It seems that silver stocks will outperform precious metals and other miners in the future.

The correction in metals may not be over yet, but it looks like it's over in case of the mining stocks, at least in terms of price.

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Thank you for reading. Have a great and profitable week!

 


 

Przemyslaw Radomski, CFA

Author: Przemyslaw Radomski, CFA

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website - SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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