Sierra Madre Gold and Silver Ltd. (SM:TSX.V) is a junior mining stock that looks like it has virtually no downside from here but a lot of upside. The company was effectively reborn at the end of May – early June. The stock started trading again on June 5, so we are only going to look at the chart from then. You can go back further and look at long-term charts from the time before it was suspended, but it is a complete waste of time because it is effectively a new company.
What happened is that the company successfully completed a big funding at the end of May and acquired the big La Guitarra gold–silver property in Mexico, which is a fully permitted and past-producing mine that has a lot of unrealized potential. Of interest to us is the fact that the funding was at 65 cents, which means that, with the price now at CA$0.39 after a downtrend from where trading resumed, we can walk in and buy it cheaply.
In addition to this, the company is reporting good grades from drilling at its La Tigra property.
What limited chart history there is looks promising. After starting trading early in June, the stock has been in a gentle converging downtrend which is a bullish Falling Wedge. The volume pattern has been bullish throughout, which is why the Accumulation line has been trending strongly higher. In addition, downside momentum has been dropping out steadily, as shown by the MACD indicator. It was dribbling along at low-level last week and, on Friday, made a new intraday low when it dropped to touch the lower boundary of the Wedge and put in a small bullish "dragonfly doji." Downside looks done, and it has a lot of upside from here, especially as it should have "the wind at its back" soon with the sector taking off higher.
In conclusion, with downside looking very limited or even non-existent and very considerable upside potential, Sierra Madre looks like a Strong Speculative Buy here, and even though a speculative junior, it looks low risk for a stock of this kind.
A must-watch classic movie for those with an interest in gold and silver in the Sierra Madre region is The Treasure of the Sierra Madre with Humphrey Bogart. Following is a clip from it featuring a swarthy Mexican bandit that will give you the flavor of it. Note that the line used by this bandit We don't need no stinkin' badges is the origin of the We don't need no stinkin' bonus line, which is said when the bonus ends in the "My Caramba" casino slot machine, although it is my assessment that you will probably have better fortune buying Sierra Madre stock than playing the My Caramba slot.
Sierra Madre Gold and Silver's website.
Sierra Madre Gold and Silver Ltd. closed at CA$0.39, $0.30 on July 14, 2023.
Posted on CliveMaund.com at 7.00 am EDT on July 17, 2023.
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The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.
