Long Silver Wheaton is my trade this week. While Silver has been out of favor the last couple weeks, SLW has some great fundamentals behind it, it reports earnings this week on Friday, March 23, and RSI is at close to an oversold extreme at 37. A Double bottom “W” shaped formation occurred from Sept 2011 – Feb 2012. A breakout from the formation occurred on Feb 22. The breakout met a throwback on Feb 29th. Price returned back down to the breakout level on March 3rd, and have since continued downward. As of Friday, March 16, price has retraced 50% of the move from the bottom of the pattern to the peak of the ascent. Looking at the 10 day chart, it appears that a positive MACD, and SS momentum divergence is taking place as price consolidates at this important 50% retracement level. With the rate of the descent starting to slow, and prices firming up around this level, I think there is a good chance that SLW could break to the upside. While price was down on Friday 3/16, we saw some bullish call option activity hints to a move higher with 29k volume vs 13k open interest in the 34 strike calls. Put volume was minuscule at 165 in the $33 strike.
Current price = $33.18
PT = $37.60 (previous double bottom breakout point)
Stop = $32.10
- The Ticker: SLW
- Target Price: 3.10 per share
- The Trade
- Buy to Open Apr 2012 35 Calls at .80 or better
- Trade Opened: March 19, 2012
Chart courtesy Finviz. Click to open larger.
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