Hecla Mining Company in the Overbought Zone

Print This Post | Topic: Silver Mining Companies — November 21st, 2009

As shareholders in the Hecla Mining Company (HL) it is tempting to sell when the chart appears to be so overbought in the hope that we can buy back the same stock at a later date.

As we can glean from the above chart the MACD has experienced a golden crossover and the stock has moved to higher ground. The crossover is a useful indicator to watch for but it does not work every time, if it did we would all be sitting on a yacht anchored in a blue lagoon in some exotic location.

Also note that both the STO and the RSI are firmly planted in the overbought zone which suggests to us that Hecla could be due to take a breather and suffer some profit taking at this point.

We also draw your attention to the widening gap between the stock price and the 200dma. We tend to get a tad nervous when this gap increases to about the 50% mark, for example the 200dma is standing at $3.15, 50% above this point would be $4.65. However Hecla closed at $6.26 which is almost double the 200dma price.

On the positive side we have silver which is also looking overbought but not dramatically so and could certainly move higher from here, dragging the associated quality silver producers with it.

In formulating your plan keep one eye on the dollar as there a number of commentators calling for a rally in the dollar and for the last few days it has headed north to close at ‘75.61′. We disagree and see the next stop for the dollar being a test of the support at ‘72′ and if that fails all hell will break lose.

So, we can sit through a possible pull back if it does occur and ride out the bumps or if you think that you can get out and back in again at a cheaper level then you can reduce your exposure next week and take that chance.

Well those are thoughts on Hecla at the moment, we have yet to make a decision but if there is a spike in silver prices and the charts become even more overbought then we may well sell some stock or if we do decide to reduce our exposure then we will post our intentions immediately so please stay tuned