Fortuna Silver Mines Inc.

Fortuna Silver Mines Inc. (NYSE: FSM) is a Canada-based precious metals mining company with operations in Argentina, Burkina Faso, Mexico, and Peru. The Company is primarily engaged in producing silver and gold minerals.

Underlying Commodities Analysis

On May 08, 2023, gold prices climbed above USD 2,020 per ounce, partially recovering from the previous session's decline due to a weakened US dollar. Investors continued to evaluate economic and monetary policy prospects while assessing the metal's recent near-record highs last week after the US Federal Reserve announced a 25-basis point rate hike but implied an end to its aggressive tightening cycle. However, on Friday, gold prices dropped by almost 2% following reports indicating that the US economy unexpectedly added 253,000 jobs in April, surpassing expectations of 180,000 and easing concerns of a potential recession in the US. With an eye towards US consumer inflation data to be released on Wednesday, investors are anticipating further insights into the probable direction of US monetary policy.

Silver futures declined from a 14-month high of USD 26 on May 4th to USD 25.6 per ounce due to the retreat of other precious metals. This decline was triggered by strong labor market data, which supported hawkish bets for the Federal Reserve's outlook. The data showed that nonfarm payrolls and wage growth exceeded market expectations in April, while the unemployment rate unexpectedly decreased. As a result, concerns of banking turmoil eased, backing the Federal Reserve's outlook that interest rates will remain elevated until the end of the year, which in turn, reduced demand for non-interest-bearing bullion assets like silver. Furthermore, the rise in interest rates also led to decreased demand for silver as an industrial input, resulting in a significant fall in prices of solar panel equities.

Gold and Silver have been near their all-time high levels and with the current market scenarios gold and silver are expected to break its all-time highs, leading FSM to realise higher prices for its commodities sales. Furthermore, with Q1FY23 results announcement on May 15, 2023, the company is also expected to realise higher revenue due to comparatively higher price for gold and silver since the beginning of 2023.

Technical Observation (on the daily chart)

With a past year return of almost 17.31%, the price has been in a persistent upward trend over the last year, with the medium-term positive trend evident by a return of 33.22% in previous six months. The price is taking decent support after a healthy correction from levels of USD 3.50-USD 3.80 (0.50-0.618 Fibonacci correction range), with the current price consolidation in the price range of USD 3.50 to USD 4.00, with an expected breakout on the upside. Also, the momentum indicator RSI (14 period) displays an increasing value of 60.44, indicating some buying momentum in the stock price. Price is also above to the 21-day SMA and 50-day SMA trend-following indicators, which can serve as dynamic short-term supports.

As per the above-mentioned price action, underlying commodities analysis, and technical indicators analysis, a ‘Buy’ rating has been given to Fortuna Silver Mines Inc. at the closing price of USD 3.93 as of May 05, 2023.

 Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is May 05, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

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