Betting on Sand


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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