SLW


Silver Wheaton has had a pretty strong pullback right into support over the last few days. I was fortunate enough to sell some of my position, and write calls against my position above $10.50. I have been an advocate of the stock in the past, riding it from its lows to the recent highs. I still continue to like this company. I like the long term fundamentals of precious metals, and in particular silver more than gold.

Today spot gold traded below $920, which has been decent support over the last week, but when GLD tried to break through 90 on the downside, it quickly reversed and took out the morning highs. I really like SLW in front of this $7.50 level. Gold is still in a bull market, and the longer we can consolidate above $900, the more explosive the move will be to the upside.

I’m playing this two ways:  Buying the stock outright, and selling put spreads.  Most recently I sold $10 September puts and bought $7.50 puts, and expect to make the spread in them in the coming months.

SLW

Looks like I’m a day late on posting this.  I started working on it last night, as you can see from the chart.  A few things that I really like from glancing at the chart:

  • The double bottom formed in late October and November.
  • The cup and handle pattern formed over the last few months.
  • The MACD divergence (You have to look at a longer term chart to get a better picture).
  • The consolidation between the $5 and $7 range.

I started my long position in late October and then added to it in November, and then during the consolidation above 6.

I think fundamentally, the company is strong.  Bill Cara posted an analysis his firm did on the company about a month ago.  It shows the strong fundamentals of the company, as well as the strong fundamentals behind precious metals.

I expected the catalyst for the stock to trade higher to be whether gold began to trade over $930 for over an hour or so, or if it had a strong move through the $930 level.  This is when I wanted to add to my position.  I missed it this morning, and thus wasn’t able to add to my position.  Earnings are due out next week I believe, so that could be a catalyst as well, either upside or downside.

Regardless, I think this is a stock to keep your eye on.  If precious metals begin their bull market the way I believe they will, this stock could trade significantly higher in the coming months.

One note I must make about what I don’t like about the stock:  they recently did an offering at around US$6.60 per share, which provided for recent resistance.  I would like to see the stock close above $7 on high volume, before I expect it to run. 

 

1 year chart

4 month chart