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Silver stock could test new highs soon

Commentaries & Views

Pan American Silver stock just pulled back to a historically bullish trendline

Posted 6/19/20 @ 12:49pm ET


Silver prices have been on a roll in June, and are headed for their second-straight week of gains. However, those gains have not necessarily translated to success for commodities issue Pan American Silver Corp. (NASDAQ:PAAS), which is sitting on a 7.3% month-to-date deficit. However, if past is precedent, there's reason to believe the silver stock could resume its uptrend in the coming months.

More specifically, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, PAAS just came within one standard deviation of its 40-day moving average. Within the past three years, two similar signals have occurred, with the equity averaging a 21-day gain of 3%. The month started off so strong for Pan American Silver stock; scoring a nine-year high of $30.59 on June 2 and nearly tripling off its March 16 lows of $10.61. Longer-term, PAAS has more than doubled in the last 12 months.

Daily Stock Chart PAAS

Deutsche Bank chimed earlier this week with a price-target hike to $28 from $24.50. There's certainly room for more bull notes, considering five of the eight analysts in coverage rate PAAS a tepid "hold." Plus, the consensus 12-month price target of $29.43 is a modest 8% premium to its current perch.

Options look like a prudent play when weighing PAAS' next move. The stock's Schaeffer's Volatility Index (SVI) of 62% stands higher than just 26% of all other annual readings. This means that options players are pricing in relatively low volatility expectations at the moment. 

Plus, the stock's Schaeffer's Volatility Scorecard (SVS) sits high at 99 out of 100, showing that the stock has tended to exceed option traders' volatility expectations during the past year, a good thing for option buyers.

By Patrick Martin, Managing Editor at Schaeffer’s Investment Research

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