ECU SILVER...

originally published April 13th, 2009
Exasperated long-term ECU shareholders must have been pulling their hair out in clumps over the past few months, for despite the company's significant discoveries and vaunted major reserves, the stock price has fallen relentlessly for over 2 years, so that it has dropped by about 85% from its peak at over C$3.50 in 2006. A major reason for the stock`s prolonged weakness is the high number of shares in issue coupled with repeated funding operations. However, the selling is now thought to be well overdone, as the price has now returned to where it was before the company made its important discoveries, and even back then there were a high number of shares in issue. As we will shortly see on the charts, there are some who would appear to concur with this view, as there is strong evidence of heavy Smart Money accumulation of the stock over the past month or so. We started to take an interest in ECU back last November, but bungled it on this occasion by buying too early and exited our positions with a moderate loss. It is very important to note, however, that with the recent heavy buying the technical condition of ECU has greatly improved since the time of our premature interest.

The long-term ECU chart shows the parabolic ascent out of a Pan & Handle base that occurred on the news of the discoveries being made public. This was followed by a top area and then a prolonged and severe downtrend, exacerbated by sector weakness and funding operations. This downtrend has brought the price right back to the Handle area of the earlier base pattern where there is strong support that is expected to generate a reversal. Volume indicators are positive overall relative to price, with Accumulation-Distribution being extraordinarily strong and completely out of whack with the price. If nothing else, these show that selling has been light on the decline, which is a positive sign. Right now the price is in a zone of strong support, and the potency of a major long-term support level should not be underestimated. It is also close to the bottom of the long-term downtrend and these factors combined are expected to generate an important reversal, especially as, as we will now see on the short-term chart, there has been aggressive accumulation of the stock in the recent past.

The 6-month chart is most interesting as it reveals many factors that are supportive of a strong uptrend beginning almost immediately. Since the sharp drop in January, a low downsloping Pan base has formed and after the middle of March we see evidence of aggressive accumulation starting to appear. The first sign of it was the buildup in volume on a day when the price closed slightly up, that was followed by the appearance of a bullish hammer on huge volume on about the 20th March. Then heavy buying appeared again at the start of this month, which drove the price at the falling 50-day moving average. This doesn't look like much of a move price wise, but it is regarded as a highly significant preliminary breakout that has set the stage for a much greater move, particularly as the price has subsequently drifted sideways marking out a tiny bull Flag or Flaglet and On-balance Volume has continued to rise. Another upleg is believed to be imminent which should result in large percentage gains from the curent low price. As we have already observed in the latest Silver Market update, silver is due for a significant rally, and the expected upleg in ECU will quite likely synchronise with this.

ECU Silver is viewed as a strong buy here, and as it has finally arrived at the strong support of the base area that preceded the great 2006 ramp, downside is believed to be very limited.

The number of shares in issue is a rather large 242 million, but it had a large number of shares in issue before the big runup in 2006. ECU trades in good volumes on the US OTC market under the code ECUXF.

ECU Silver website

ECU Silver Mining Inc, ECU.TO, ECUXF on Other OTC, closed at C$0.54 and $0.4386 on 10th April 09.