Chart of the Day (October 31, 2012)

by DAN PAAS 
I’m Dan Fitzpatrick at Stock Market Mentor and Option Market Mentor. Today I want to look at a potential squeeze here on Pan American Silver ( $PAAS Pan American Silver Corp ). This is a stock, you know, guess what? It trades along with silver; but you can see what’s been happening here for quite awhile on the stock and been trending lower, 200-day moving average was a high ceiling, it couldn’t even hit that level, and then finally we get to push above this 200-day moving average, a pull back to test it, and now we’re just going sideways. So what do we do? Well there’s a couple ways to trade this, it really just kind of depends on your timeframe; look at support down here at about $20.50, something like that, if the stock pulls back to that level then you can make a speculative buy because you’ve got the 50-day moving average just below that, I mean this is a stock that’s probably not going to come unglued; you’re also now at support, then if the stock does start rallying back at least you’ve got a profitable trade while you’re waiting for a breakout. Or you could just wait for a close above the upper Bollinger Band, the top band right now is $22.21, you can see that over on the left in the box on the left of your screen. If the stock breaks you just set yourself a price alert, $22.21, if the stock starts pushing above that level then you can look at it and see if it’s a breakout or its fakeout. Ultimately I look at this as just a consolidation phase, look at the volume, we like it when uptrending stocks consolidate on declining volume because what that means is there’s not a lot of trading interest in the stock even after a move like this; the stock starts to pull back, trading activity is really, really heavy, that reflects profit taking, and like a lot of profit-taking that reflects institutional selling; they’re the only ones that can generate that kind of volume, the kind of volume that really, really pushes, you know, spikes well above average. So here we’ve got a sideways drift with a downward drift in volume, that’s a pretty good set up to me so just watch this stock and see if it works for you, my bet is it will. Okay members, I’ve got a special intraday Strategy Session for you which, is in lieu of tonight’s Strategy Session so hope you find that useful.

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