Monday, March 17, 2008
A closer look at SLW: so beautiful, so bullish
Every once in a while, you come across a chart that is just screaming at you to go long. This morning, I took a long hard look at a 1-year chart of Silver Wheaton (SLW), and it sure as hell screamed out loud. It gave me deafening comfort that I'm long SLW calls.
Right now, SLW looks very bullish both fundamentally and technically.
Fundamentals:
Inflation is soaring, dollar is toppling, and Ben is going to cut +75bp tomorrow. Gold has been getting some press for shattering $1000/oz, but silver continues to outperform gold in the background. SLW's silver production remains unhedged, and SLW will take full advantage of further growth in the price of silver. There is potential downside risk if the stock market crashes, but SLW has been diverging from the broader stock market since the serious sell-offs began back in January.
Technicals:
Looking at the chart above, SLW has been consolidating ($14.5-$18.5) during the past six months. SLW took a breather after a powerful 80% rally during the fall of 2007. SLW has also been taking pressure from a tumbling stock market, causing it to lag behind silver futures during the past few months. But with silver futures continuing to soar to record levels, SLW will re-align itself with silver prices. The chart at the bottom shows that the SLW:Silver ratio is rebounding from a strong support level. Looking at other technicals for SLW: volume is rising noticeably, momentum indicators are pointing up, and the long term trend is looking strong. My SLW 20 calls (50 cents away from being ITM) will expire in four days. If Bernanke reflates aggressively tomorrow, my best case scenario will be for SLW to test the upper boundary of its current uptrend (around $22.5) before expiration.
Right now, SLW looks very bullish both fundamentally and technically.
Fundamentals:
Inflation is soaring, dollar is toppling, and Ben is going to cut +75bp tomorrow. Gold has been getting some press for shattering $1000/oz, but silver continues to outperform gold in the background. SLW's silver production remains unhedged, and SLW will take full advantage of further growth in the price of silver. There is potential downside risk if the stock market crashes, but SLW has been diverging from the broader stock market since the serious sell-offs began back in January.
Technicals:
Looking at the chart above, SLW has been consolidating ($14.5-$18.5) during the past six months. SLW took a breather after a powerful 80% rally during the fall of 2007. SLW has also been taking pressure from a tumbling stock market, causing it to lag behind silver futures during the past few months. But with silver futures continuing to soar to record levels, SLW will re-align itself with silver prices. The chart at the bottom shows that the SLW:Silver ratio is rebounding from a strong support level. Looking at other technicals for SLW: volume is rising noticeably, momentum indicators are pointing up, and the long term trend is looking strong. My SLW 20 calls (50 cents away from being ITM) will expire in four days. If Bernanke reflates aggressively tomorrow, my best case scenario will be for SLW to test the upper boundary of its current uptrend (around $22.5) before expiration.
Friday, March 14, 2008
Silver Wheaton (SLW) vs Yamana Gold (AUY)
My two favorite stocks. Which one will reach 20 first? I own some March SLW calls with 20 strike, so I would like to see SLW rip through $20 by next Thursday. A quick glance at the chart of AUY indicates potential resistance at $20.
Update: SLW and AUY closed neck and neck.
Update: AUY WINS
Update: SLW and AUY closed neck and neck.
Update: AUY WINS
MoM CPI Unchanged!
Good morning. Today's data indicates that consumer prices in the U.S. were UNCHANGED during the month of February. If I'm not mistaken, energy and commodities prices were surging to historical levels throughout February. Bloomberg news is citing dropping fuel costs as the cause of last month's CPI, but whatever the cause may be, inflation rate is most certainly NOT unchanged.
Looking at initial market reaction to the CPI data right now, the dollar seems to be slightly bid, as cooling inflation should support the greenback. The yield curve is also flattening. But considering that Fed day is just around the corner, I think the market will interpret today's CPI data as giving Bernanke more room to cut rates. This should be bullish for both stocks and commodities (extra bullish for mining stocks).
Looking at initial market reaction to the CPI data right now, the dollar seems to be slightly bid, as cooling inflation should support the greenback. The yield curve is also flattening. But considering that Fed day is just around the corner, I think the market will interpret today's CPI data as giving Bernanke more room to cut rates. This should be bullish for both stocks and commodities (extra bullish for mining stocks).
Subscribe to:
Posts (Atom)
