My silver bug friends are going to hate me for this, but it looks like Silver Wheaton (SLW) is completing a massive 11 month head and shoulders top formation. If this pans out, the price target is around $15, which would suggest a steep 50% decline for the stock. See weekly chart below
Along with a strong bearish technical pattern, SLW has weak fundamentals. The price of silver is falling with the whole commodity complex as the world starts to price in a collapse of the euro and a hard landing in China. Silver is now below its 200 day moving average and officially in a bear market (20% off its high). From a macro outlook, general market conditions do not favor a higher stock price for SLW. About the only positive you can say about SLW is that it is short-term oversold.
FD: I am going to short SLW on Monday at the open. To hedge any possible loss on this trade, I am going to purchase the Oct 29 call option. I prefer this to a simple stop loss. Why? HFT manipulation has made stop losses very risky (alla May 6 flash crash).
Update: Postion filled at 30.14 at the open.
Black Swan Insights
Along with a strong bearish technical pattern, SLW has weak fundamentals. The price of silver is falling with the whole commodity complex as the world starts to price in a collapse of the euro and a hard landing in China. Silver is now below its 200 day moving average and officially in a bear market (20% off its high). From a macro outlook, general market conditions do not favor a higher stock price for SLW. About the only positive you can say about SLW is that it is short-term oversold.
FD: I am going to short SLW on Monday at the open. To hedge any possible loss on this trade, I am going to purchase the Oct 29 call option. I prefer this to a simple stop loss. Why? HFT manipulation has made stop losses very risky (alla May 6 flash crash).
Update: Postion filled at 30.14 at the open.
Black Swan Insights
