Market Curiosity: Exploring Markets And Systems

April 20, 2011

Thoughts on SLW… Time to be flexible… What if the anticipated silver correction does not materialize?

Filed under: Just Watching — Tags: , , , — Jeff Fitzmyers @ 10:14 pm

Edit April 21: SLW opening up a few percent is showing strength. Watching and waiting…

Trivia: Did you know it takes a little more than 3 90% silver dimes to make 10 FRN’s? Yes, each dime is currently worth $3.31. That’s up 3,200%, money stolen via the hidden tax of inflation.

Raymond Merriman has an astro turn date for the metals over the weekend. They are usually right, but not always. And Mr Fergusen is anticipating a few down days soon. I think so too. But every little decline in silver is met by buying. And price has yet to close, or even trade I think, below a prior days low. When parabolic markets really take off, just trail a stop a bit below the previous days low. I you have deep pockets, you can probably ignore the first correction (lasting just a few days, but might be very volatile). In silver, probably the first and second correction can be ignored. If the correction is not for a while, all those anticipating it by getting flat or short will have to go long, or cover and go long if they want to reestablish positions — propelling price even more.

SLW could be anticipating a significant correction too. Some other thoughts on SLW:

I traded emails with SLW investor relations today. There don’t seem to be significant problems. Just institutions seem to be selling in anticipation of a silver correction, and the change of leadership which I’m told can often suppress price for a bit. Some comments:

@TrendRida: People never quit w/o notice from a gravy train. Until the news comes out why $SLW’s CEO bailed, it will be a laggard….
@paulwoll: I have read that theory $slw proxy to short $slv. I agree this is also likely & they will have to cover before earnings or sooner…
@TraderSanJose: do you think that $SLW is taking a beating because it can be borrowed for a short, but $SLV is hard to get a borrow?
@paulwoll: Yes I believe that is also the case, though I think they are nuts to short $SLW and when they cover it will be spectacular.

I don’t know. I also can’t easily find a SLW replacement.

Fabian: Two things going on.
… The days of practically stealing silver streams from gold miners are over.
Those contracts that were negotiated when silver was cheap are now wildly obscenely profitable for SLW and that will continue for the next 4 yrs at least. At some point way out there, they have to replace streams as the gold mines gradually play out.
A long ways off but remember Pfizer and how over 5 years in advance of major patent expiration for their two big drugs, the stock started going down and kept going down as the market knew they could not replace those two huge cash cows…

Ok so that brings us to the second part.
I think everyone buying silver is scared to death that they will get caught in a violent reversal because it’s so extended, overbought etc… I believe and am 100% convinced that a lot of hedge funds are buying silver and shorting SLW as a hedge. It’s a hedge that is a very good one so far and when something works, word spreads quickly in the hedge fund community and more do it.

I’m not great with Elliot wave, and don’t put a lot of emphasis on it. But it seems like there have only been 3 waves up from the March 16th low. IF true, I suppose the targets could be between 38 to 40, or even as low as 35 to 36. I don’t know.

Trading plan: Watch to short SLW if silver starts to drop. If shorting silver, which I doubt I will do, use a short term slightly out of the money put. If silver keeps going up, look to EXK and then to SLW unless SLW makes an obvious buying pattern like a gap opening down that reverses up.

I can also imagine price hits $50/oz and then dumps back to $45/oz in a day or 2 and then starts to ascend for real.

+ Embry – JP Morgan Massive Short Position Causing Silver Spike
+ 25% Of Scotia Mocatta’s Silver Transferred From “Registered” To “Eligible” Status: A 45% Reduction In “Physical”

2 Comments »

  1. I should have just bought PSLV instead of messing around with SLW. Thanks for the write up.

    Comment by kingzardoz — April 22, 2011 @ 1:39 am

  2. I wish PSLV had options. The interesting thing is since this sector is so small, there are relatively few options. It seems like SLW is pricing in a spike to 50 then a fast and deep retreat for a while. If that does not happen and silver is above 60 a week later, many will be rethinking the trading plan. Then SLW might catch up quickly. So there might be a good trade opportunity there.

    Comment by Jeff — April 22, 2011 @ 7:37 am


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