Thursday, April 14, 2011

We hold 300 shares with a cost basis of 42.01. After creating a nasty bearish impulse leg on the hourly chart on Monday, SLW has been playing toe-sies with a support line near 42.00 that goes back to late March. Since I don't fancy doing nothing while the stock glowers menacingly at us, I'm going to suggest taking the offensive with a 2.35 bid for three June 40 puts, day order. My goal is to leg into a bearish "free" butterfly keyed to the 36 strike. This strategy is suitable only for those who are long stock, but I will continue to look for a great entry spot for newbies. It is not here, though, at these levels, since the question of up or down looks to me like a coin toss.

Silver has clawed back some ground following Monday's thrashing, recouping as of this moment about half of a $2.27 loss.  The futures are trading Wednesday night near their recovery highs, but it will take a further push to at least 41.315 to shift the rally to a higher gear.  That would create a bullish impulse leg of hourly-chart degree, surpassing a small peak at 41.310 made on the way down earlier this week. _______ UPDATE (9:05a.m. EDT):  This gets so-o-o tiresome.  The futures took a whoopee cushion leap to 41.400, only to recede nearly as precipitously. Sometimes it seems as though we should trade this vehicle using a clock, not charts.  In any event, the bad guys will have to deal with the fact that the thrust, fleeting as it was, created a bullish impulse leg on the hourly chart. If and when the follow-through leg occurs, it has the potential to reach 41.495.  The midpoint resistance associated with that target is 41.020, so that's the number to beat in the hour ahead. _______ FURTHER UPDATE (1:40 p.m. EDT):  The bad guys are sucking wind today, SIK having blown through every minor pivot that dared get in its way. The action has put a 43.61 rally target nicely in play, subject to possible midpoint kanoodling at 41.660.  That last number has already been exceeded, increasing the odds that the bad guys will reap further abuse and punishment in the days ahead. The pattern yielding the 43.31 target can be found on the hourly chart using the following coordinates: A=38.07 (4/5), B=41.975, C=39.705.

The short-term outlook is tied to an important support at 1454.10 that we discovered at the tail end of Wednesday night's Hidden Pivot webinar.  It is the 'p' midpoint of the minor pattern shown, but if it is breached by more than 30 cents, I would expect the weakness to continue to its 'd' sibling at least, 1448.70.  At that point the 1440.20 target of a larger pattern -- the one whose 1452.00  midpoint reversed yesterday's selloff -- would be in play. In any event, we remain long a single contract whose cost basis has been reduced to 1446.00 by the profitable sale of a second contract we'd held earlier in the day. Lower the fixed stop advised at that time slightly to 1453.50, but switch to a $6 trailing stop if 1464.90 is hit on an upthrust.  A print at the price would likely leave bulls in charge for the rest of the week. ______ UPDATE (12:09):  With the creation of a slightly higher 'c', the 1454.10 danger threshold has migrated north by a few ticks. I'd suggest monitoring the uptrend, since it may necessitate further change in the price points noted above.  However, it would take a thrust to 1472.90 for bulls to take charge.

Dragged kicking and screaming -- though not, perforce, much lower -- the futures gave back most of the gains they'd achieved overnight, continuing a downtrend that projects to 1295.25 (see inset). You can bottom-fish there with a stop-loss as tight as two ticks, but a less risky play -- albeit one with higher odds of going unfilled -- would be to bid 1393.75, stop 1392.75.

Shortly after 1 a.m., June Gold was backing away from a small precipice -- a midpoint HP support whose breach would put two downside targets in play.  I took pains to show exactly what was happening in the chart accompanying today's gold  chart, but the threat has abated somewhat since.