Silver prices have fallen a few notches amid mild profit-taking. And the ascent in Silver Wheaton Corp. (USA) (NYSE:SLW) has been put on pause. If you’re wondering when to jump back in SLW stock, wonder no longer.
SLW is arguably the most popular silver stock, as reticent investors unwilling to buy silver directly (or via exchange-traded funds) often wander into the world of silver stocks. And first to greet them is SLW.
Its correlation to silver prices is strong and its daily trading volume consistently hurdles the five million mark. As a result, its options board offers supreme liquidity. The open interest is beefy, the bid-ask spreads tight. It even has weekly options if that’s your thing.
What caught my eye in Silver Wheaton stock is the nice little high base forming over the past two weeks. While silver prices have been retreating, shares of SLW have been holding firm near their highs. That’s some relative strength worth bragging about.
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The two weeks of chop have done wonders in working off the overbought pressures in the stock.
What’s more, we now have a proper base to launch from if silver prices make a giddy move to the upside again.
The SLW Stock Trade
No need to jump in SLW just yet though. Wait for a breakout over the $26.60 level to signal the next rally has commenced. Stock traders can simply buy shares with a stop below the low of the base ($25).
Option lovers will be happy to know derivatives can be snatched up on the cheap here. The IV rank for SLW options is a lowly 9%, suggesting option premiums are near their lowest levels for the year.
If the $26 price tag of Silver Wheaton is too much to bear (or if you simply want to go for the gusto by tapping into leverage), consider buying the Oct $25 calls.
Currently, they’re priced at $2.99, but at the time of the trigger they’ll probably be priced around $3.40.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
