Silver Wheaton Corp. (NYSE: SLW)

Silver Wheaton Corp., a mining company, together with its subsidiaries, operates as a silver streaming company worldwide. The company has 14 long-term silver purchase agreements and 2 long-term precious metal purchase agreements whereby it acquires silver and gold production from the counterparties located in Mexico, the United States, Greece, Sweden, Perú, Chile, Argentina, and Portugal. Silver Wheaton Corp. is headquartered in Vancouver, Canada.

Please take a look at the 1-year chart of SLW (Silver Wheaton, Corp.) below with my added notations:

1-year chart of SLW (Silver Wheaton, Corp.)

SLW hit a high of $40 in February and sold off consistently until May. Since then, the stock has rallied back up to the $40 resistance (red) and appears to have formed a cup (blue) and handle (purple) pattern. The volume decrease (green) during the formation of the handle is consistent with a true cup and handle. SLW would confirm the pattern by breaking up through the $40 resistance, and if it does, the stock should be moving higher from there. To add validity to any breakout, the break should occur on heavier volume than usual.

Keep in mind that simple is usually better. Had I never pointed out this cup and handle pattern, one would still think this stock is moving higher simply if it broke through the $40 resistance level.

The Tale of the Tape: SLW seems to have formed a cup and handle pattern. A long trade should be entered on a breakout above the $40 level with a stop placed under that level.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT