Betting on Sand
- Posted by Greg Harmon
- on June 30th, 2016
US Silica is headquartered in Frederick, Maryland, but has mines and plants thoughout the Allegheny Mountain region. I drive past one of their plants, in Berkeley Springs, West Virginia at least twice a year when I make my trek from Ohio to my parents home just south of Richmond, Virginia. It looks the same every time I pass it. Summer, winter, fall, spring. The water tanks churning, not many cars in the lot and not much going on. But this site is part of a $2 billion company that has been innovating for 100 years.
Their products are used in fracking and other applications so as you might suspect, the stock has had a rough spell since the steep fall in oil prices. The chart below shows it falling from a a double top over $73 in September 2014. After a small bounce in early 2015 it fell back under $15, down more than 80% from the high.
But the period from October 2015 through February 2016 ground out a double bottom and it has been rising since moving over the 50 day SMA in late February. It crossed above its 200 day SMA in March and it made a Golden Cross in April, continuing higher. Currently it is consolidating just under a 38.2% retracement of the long downward movement.
As it does, it has built a Cup and Handle pattern. This pattern carries a target to about 57.50, on a break over the Handle, at 35.75. Momentum has been building for the stock. The RSI has made a series of higher lows and is in the bullish zone. The MACD is pulling back, resetting lower, but still positive. And it has over 20% short interest that could act as fuel to spur it higher on short covering. Continued movement over 35.75 is a buy signal.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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