The technical formation with which the layman is most familiar is the "Head-and-Shoulders" reversal, but in the world of precious metals stocks, the formation that has been most prevalent over the past few years is the "Pan and Handle" base, a particularly bullish pattern that points to a period of sustained and substantial advance.
It is no coincidence that this should be the dominant formation showing up amongst mining stocks. In the old days prospectors used to pan for gold, and therefore it is obvious that the spirits of the 49ers and of a host of other goldbugs and prospectors of yesteryear are communicating with us through the charts - telling us that we are on to a good thing.
A particularly fine example of a sign from our forebears is the chart for Coeur d'Alene. The 1-year chart is, viewed in isolation, a rather dreary picture that reveals little. Following a period of decline early last year, the trend has remained neutral. However, the 5-year chart shows a fine, clear "Pan and Handle" formation, with the price now completing the Handle part of the pattern. After a steep decline earlier last year, the price has stabilized in a converging symmetrical triangle pattern. The Handle part of the pattern is a very large consolidation area that serves to correct the overbought excess that resulted from the price blasting upwards out of the Pan base.
The price has already started to push up above the top line of the triangle, and with the 200-day moving average flattening out and the 50-day soon to rise up through it, the stage is set for renewed advance. A break above the November highs at about $5.25 will be a bullish development that should usher in a period of more rapid advance.
Coeur is regarded as a strong buy at this juncture with a stop below important support at $3. This stop may seem to be set rather low, but still affords a highly advantageous risk/reward ratio, given the upside, and readers always have the option to set a stop at a level where it is personally acceptable.
As a bellweather stock, the bullish outlook for Coeur d'Alene augers well for silver stocks generally and for precious metals stocks in general.
Coeur d'Alene Mines CDE on NYSE, closed at $4.27 on 14th March 05.