Despite fundamental drivers that theoretically should support higher commodity prices — particularly mixed economic performances that cast a shadow on the Federal Reserve’s implementation of hawkish monetary policy — silver prices have been relatively dormant.
Nevertheless, the fact that the silver market is up is a dramatic reversal from recent action.
For example, spot silver prices have refused to fall below the $15 level, which represents a key technical support line. Against a long-term chart, the current price of $16.46 allows silver to maintain a generally bullish posture. Additionally, gold bullion has been purchased in large volume over the past week, likely due to short covering.
Because gold and silver markets tend to have a correlated relationship, recent events in the precious metals space might hint at higher prices for both metals.
Subsequently, this bodes well for silver stocks, with several producers scheduled to release their earnings reports later this week. Should the underlying silver market continue to hold off the bears and string together a series of positive trades, investing in silver mining companies could potentially lead to very handsome rewards.
That said, here are four silver stocks that could be ready to shake up Wall Street.
Silver Stocks: First Majestic Silver Corp (AG)
Securing a private placement deal with BMO Capital Markets worth nearly $25 million, First Majestic Silver Corp (NYSE:AG) plans to hasten its ongoing mining development projects. Its management team also accomplished what few companies in volatile industries have achieved: raising money in depressed markets.
This bit of good news is a welcome change. Over the past 13 earnings reports, only two have met or exceeded Wall Street expectations. However, there are subtle indications that the tide is turning. The last earnings report — released on Feb. 23 of this year — beat consensus estimates, breaking a four-quarter losing streak.
In addition, the velocity of AG stock’s performance after its earnings release expanded dramatically. A month after First Majestic reported its Q4 2014 results, AG stock fell a little more than 10%. However, after Q3 results were released, AG’s price dropped nearly 14%. Though both figures are in the red, the silver stock’s most recent performance represents a 26% improvement between the two quarters.
The major caveat is that historically, First Majestic has been a capricious investment. But for those willing to ride its ebb and flow, AG stock offers tremendous return potential.
First Majestic Silver reports earnings May 7 before the bell.
Silver Stocks: Silver Wheaton Corp. (USA) (SLW)
As one of the stalwarts of the precious metals mining industry, it’s no surprise that Silver Wheaton Corp. (USA) (NYSE:SLW) is one of the more stable silver stocks. Despite also suffering from the downdraft of the metals complex, Wall Street traders believe that SLW stock has bottomed and should press higher from current price levels. This assumption derives from recent high-volume options market activities.
Investors also can refer to SLW stock’s performance a month after its earnings reports are released. Since November 2012, the velocity of SLW has generally increased, charting a series of higher highs and higher lows, to borrow a technical analysis terminology. That this trend remains largely unbroken in the face of some ugly fiscal performances by Silver Wheaton lends much-needed confidence for investors willing to take on the risks inherent here.
Coincidentally, SLW does have statistical trends working in its favor. Over the past five weeks, its net performance measures 0.59% — a figure that in the past has led to a 60% probability of higher returns within the next five weeks.
The trade-off between the higher probabilities of Silver Wheaton as opposed to smaller-cap companies like First Majestic is in the returns. Naturally, more speculative opportunities provide higher profit potential. However, the relative stability of SLW makes it attractive for those who wish to balance out the risk-reward component of their trades.
Silver Wheaton reports May 7 after the bell.
Silver Stocks: Endeavour Silver Corp (EXK)
Fundamentally, Endeavour Silver Corp (NYSE:EXK) carries substantial momentum heading into its first-quarter earnings report, scheduled to be released on May 6 before the bell. A preview of Endeavour’s financial performance revealed that its silver production rate advanced further than originally forecast for this year, with 1.8 million ounces of the white metal already mined.
Furthermore, investor sentiment for EXK stock, as measured by its one-month performance after earnings release, has been steadily rising higher since March of last year. This is especially noteworthy considering that the last two earnings results for Endeavour were particularly awful, with an average negative surprise of 99.65%. It begs the question: how will EXK stock respond when earnings are positive, which appears to be likely.
Although the answer may very well be bullish, it must be noted that EXK is historically a very volatile stock. Given that its five-week average performance is a paltry 0.15%, EXK statistically has a low probability of 38% that by June, its shares will be profitable. However, its most recent week-over-week performance is a robust 6.84%, which may suggest that professional traders are gambling for a positive earnings result.
For those who thrive on high-stakes poker, Endeavour Silver just might be the deal of the year.
Silver Stocks: Great Panther Silver Ltd (USA) (GPL)
With a market capitalization a hair above $75 million, and a price under $1, Great Panther Silver Ltd (USA) (NYSEMKT:GPL) is easily one of the more volatile silver stocks available for trading.
Translation: Trade with care. Use limit orders and stop losses.
Although there are fundamental factors that are favorable for GPL stock, such as the recently announced acquisition of Cangold Limited (OTCMKTS:CGLJF), investors have shown little evidence of enthusiasm. For instance, since the week of the acquisition announcement, GPL has fallen nearly 13% in the markets. Additionally, with only one analysis firm covering Great Panther, news about the company is seldom reported.
Technically, however, there is some rationale for bullish optimism. When looking at a logarithmic-scaled chart of GPL stock’s four-week running average price history, it’s fairly evident that bearish pressure has been declining since the beginning of the year. This is aligned with similar trends amongst other silver stocks and within the silver bullion market itself.
A positive earnings result on May 6 after the bell could do wonders for GPL, with many investors looking for a reason to reengage the silver producer. This also will depend on the underlying bullion market, which so far is holding strongly at established support levels.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.