Clive P. Maund
gold, silver, & oil shares


SILVER WHEATON - the perfect silver stock to SHORT - analysis & options info...

originally published September 22nd, 2011

A magnificant example of a completing Head-and-Shoulders top is evident on the chart for Silver Wheaton, which is so perfect that it almost gives grounds for suspicion that it might abort. However, that now looks most unlikely given its dramatic intraday reversal yesterday and the fact that the entire market, including the PM sector, looks set to tank. We have already opened Put options in Silver Wheaton earlier, having observed this bearish chart, that have taken a beating in recent days but should quickly recover, but the strength of recent days in the stock has thrown up the chance to load up with more before it plummets - don't worry about having to chase it down this morning - the decline in prospect is a multi-day or rather multi-week event that will take it MUCH lower.

On its 6-month chart we can see that after trying to break above the resistance at its Right Shoulder highs yesterday morning it reversed dramatically in the late trade, along with the rest of the sector, to close down on the day, leaving behind a very bearish "shooting star" candlestick on its chart, which is a sign of an important reversal that will lead in the current environment to a severe decline, starting with a swift drop to neckline support, where it may bounce. After neckline support fails the rate of decline should accelerate and it should plunge as shown on the 3-year chart further down the page.



Most Puts in Silver Wheaton should soar, and the most efficacious contracts for leverage combined with relative safely are the strikes in the $30 to $35 zone, expiring in October or later (September is far too close), examples being the October 30 at $0.15 and November 36 at $1.13, which prices will of course rise substantially at the open with silver having broken down this morning, but don't let this deter you. Other tactics available are to write Calls for income (protect any such positions with cheaper Calls at higher strikes, in case Silver Wheaton is subject to a takeover, considered unlikely in the current environment) or to simply short it, with protective stop above Right Shoulder resistance.


Silver Wheaton website

Silver Wheaton Corp, SLW on NYSE, SLW.TSX, closed at $40.66, C$40.83 on 22nd September 11.

Poated at 9.25 am EDT on 22nd September 11.