Examining the technical and sentiment backdrop of a silver mining company by Jocelynn Drake (jdrake@sir-inc.com) 10/30/2008 11:46 AM Text SizeEmail a friend Print My Yahoo Add RSS Del.icio.usFacebook Reddit Newsvine Digg Keywords: PAAS stocks options mutualfunds The shares of Pan American Silver (PAAS: sentiment, chart, options) have shrugged off a downgrade this morning to tack on more than 1.6%. Before the open, J.P. Morgan lowered its rating on the security from 'overweight' to 'neutral.' Overall, Wall Street's outlook for the shares is relatively optimistic. According to data from Zacks, the stock has earned 5 'buy' ratings, 2 'holds,' and just 1 'strong sell.' This configuration leaves ample room for potential downgrades, which could weigh on the security. What's more, Thomson Financial reports that the average 12-month price target for the equity stands at $23.31. This lofty target implies that analysts are expecting the shares to more than double in value during the next year. Any price-target cuts from this group could spell trouble for the stock. For those not familiar with PAAS, it is an exploration and mining company that produces more than 15 million ounces of silver annually and has proved and probable reserves of more than 225 million ounces. Its producing mines, all located in the Americas, include the Quiruvilca and Huarn silver mines, both in Peru. The company also mines gold and lead. Founded in 1994, Pan American Silver has development projects in Argentina and Mexico. Technically Speaking The stock has suffered a steady decline since its March 2008 peak of $44.10, resulting in a loss of more than 73% under resistance at its 10-week and 20-week moving averages. However, it appears that the shares are attempting to stage a rebound. The stock is up more than 1% this morning. PAAS put in a near-term low at the 9 level on Tuesday and has climbed above resistance at its 10-day moving average, which had capped the shares since September 29. The equity is still facing resistance at its 20-day moving average at the 13.50 level. Yet a break above its 20-day trendline would leave the shares free of potential resistance until the 18 level, which is the site of former support. Sentiment Backdrop Options players are extremely optimistic when it comes to the shares of PAAS. The Schaeffer's put/call open interest ratio for the stock stands at an annual low of 0.36. This indicates that investors have not been more optimistically aligned toward the shares at any other time during the past 12 months. In fact, during the past 10 trading days, the International Securities Exchange (ISE) has reported that an average of 4.98 calls have been bought to open for every put purchased. This reading is higher than 72% of all those taken during the past 52 weeks, indicating a growing optimism among options players. Overall, traders should keep a close watch on resistance at the stocks' 20-day moving average. A rejection here could send the shares on the next leg of their downtrend as the optimists abandon their bullish positions. Want to catch all of my articles? You can get headlines for my articles emailed directly to you. To try it, simply click here and sign in with Schaeffer's username and password. Once on the alerts page, select 'author' from the first drop down box, select how often you want to be alerted, and enter 'Jocelynn Drake' into the third box.