Monday, July 4, 2011

Market Watch: SLW

Silver Wheaton is a stock that has long underperformed, its underlying metal. And even though silver or SLV the closed at $33 a share on Friday and Silver Wheaton closed at $32.41 share, Silver Wheaton is still underperforming silver in my opinion. The reason is very simple, when you buy a stock you also buy inherent risks that are not included in the cost of simply buying silver. Corporations can have strikes, become nationalized, or have any number of other calamities afflict them. Silver on the other hand will just lay in the ground. So, you should demand more bang for the buck when you buy a silver stock than when you buy the underlying metal.

With that said chart of Silver Wheaton looks fairly compelling. You can see how the shares gapped up and away from $30 back in November. Since $30 has held support for SLW at least twice. Once in January and again last month. As long as Silver Wheaton stays above $30 a share we want to consider going long. But where should we enter? To answer that question take a look at the intraday chart in the fifteen minute time period.

You can see clearly how it has been turned back twice from $33.50 share. So, I would not consider going long until a clear break of $33.50.

Then the long and the short of it is this, long above $33.50, short below $30, out in between.

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