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« Where is the Global Economy Headed? The Experts Weigh In | Main | Silver prices: Sell, Hold or Buy? »

Silver Wheaton Corporation sold off hard

SLW Chart 04 May 2011.JPG

We kick off with a quick look at the chart which is not a pretty sight as the correction in silver prices along with management changes at the top of Silver Wheaton Corporation (SLW) have hit one of favourite stocks particularly hard. The technical indicators are now in the oversold zone, with the RSI sitting at 35.82 suggesting that a buying opportunity may lie ahead. We need to let this bout of selling pass on by and allow the dust to settle before we make a move. If we cast our minds back to the start of the year we experienced a similar sell off before silver prices turned around and set off on a spectacular run to almost touch $50.00/oz.

When prices hit those nose bleed levels we all wish that we had acquired more stock at lower levels, this move could be just that opportunity about to give us a second chance at picking up a bargain.

However, this sell off has thumped our accumulator call options which are well and truly under water at the moment, we haven’t forgotten about them, we have still to make a move and we will of course post if and when we do make a move.

We recently wrote to Silver Wheaton asking for an explanation about their performance, this was before the sell off in silver prices and this is the reply that we received:

Hi Bob,
Thanks for your email. As you are aware, Silver Wheaton has a new CEO, Randy Smallwood, at the helm. Randy was a co-founder of Silver Wheaton, and has been instrumental in helping to build Silver Wheaton into one of the world’s largest silver companies. In recognition of his significant contribution to the company’s pre-eminent position as market leader in its sector, Randy was appointed Silver Wheaton’s President in January 2010. While he was seen by most as the natural successor to Peter Barnes, it is not unusual for this type of news to have a short term impact on a company’s share price, which is likely some of what we are experiencing.
While it is often very difficult to comment on short-term share price action, the bigger picture, however, is that in the last month the senior silver producers as a group have underperformed versus the price of silver. Some of the feedback that we are receiving is that institutional investors are concerned that the silver price has advanced to quickly and a correction is overdue. In light of this, they have been selling silver equities over the past weeks (in particular their top performers, such as Silver Wheaton) in order to lock in profits.  
Please don’t hesitate to contact me if you have any further questions.
Brad Kopp
Vice President, Investor Relations

Finally, a number of readers have asked if Eric Sprott has sold his silver, for an answer we refer to this excerpt of an interview that appeared on King World News as follows:

There is a great deal of misinformation out there regarding what Sprott was actually doing when SAM sold some PSLV.  When asked about what has transpired Sprott remarked, “Well Eric in response to your question, any proceeds that we’ve received from selling PSLV have immediately gone back into silver or other silver equities.  And I can tell you we have the highest position in physical ownership that we’ve ever had, and we have not lost one ounce of our encouragement for the outlook for the silver price.”

Eric goes on to say :

We’ve been committed to silver and the fundamentals for silver and people’s interest in silver, so it would be massively incorrect to suggest we think silver has hit a high.  We don’t think that at all, I’ve suggested it (silver) should trade at a ratio of one to sixteen to gold.  Gold I am sure will be $1,600 not too long from now, and by implication that would suggest it (silver) could trade up to $100 and I’m not shying away from that.” 

To read the this article in full please click here.

Yesterday we reported that had closed another two trades for profits of 108.52% and 116.67% respectively, well today we closed two more profitable trades and have updated the chart and stats accordingly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.

sk chart 04 May 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

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Reader Comments (1)

A great stock to sell cash secured puts on. Get paid to buy the stock cheaper.

May 4, 2011 | Unregistered Commenterfallingman

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