SLW

Silver Wheaton is within striking distance of an 'external' peak which if exceeded would signal the genesis of a powerful impulse leg with the potential to turn the intermediate-term picture decisively bullish. It lies at 34.61, exactly 1.70 points above the high of yesterday's spike.  In order to be valid as an impulse leg, the thrust would need to be unpaused (i.e., have no b-c correction) once the internal' peak at  33.02 is surpassed.  Rather than speculate, we'll wait for the stock to tell us whether it is ready to emerge from the woods.

Silver Wheaton has managed to swim upstream in recent days, but let's see it push above the 42.89 'external' peak shown in the chart today or tomorrow before we become true believers. The same chart shows that the 42.50 top of yesterday's spike came with 32 cents of a Hidden Pivot target going back to June 20's 29.80 bottom (aka point 'A'). _______ UPDATE (11:51 a.m. EDT):  The stock has collapsed today, opening on a 6.2% gap lower, at 38.10. Subsequent weaknesss has brought it down to as low as 36.66, representing a loss of 9.8%.  The move is strongly impulsive on the hourly chart, though not yet on the daily.

We hold the September 42/46/50 call butterfly spread four times for $1.04.  You can take this position off at will for 2.10 or more, although the stock will need to pop above 43 or so to give us a fighting chance to double our money. Note in the accompanying chart that even if the stock is carving out a head-and-shoulders pattern, there's still room for a pop into the mid-$40s before it tanks.  The longer it merely goes sideways, though, the less threatening the pattern will become. _____ UPDATE (September 14):  I'll record a $416 trading loss just to get this stinker off the sheets.  It could have been worse, since we legged into the first part of the position when the price of silver was freefalling.

We hold the September 42/46/50 call butterfly four times for $1.04, and it has gone from a longshot bet to a 5-to-2 horse in the last two weeks.  Because the stock is coming up on two Hidden Pivots that have some potential stopping power, let's trade against our position by buying some puts. The targets lie, respectively, at 41.55 and 42.77, so I'll recommend buying four September 38 puts if the lower number is approached today within 4-6 cents.  Stop yourself out if SLW trades 41.71 or higher, but re-short using the September 40 puts if 42.77 is closely approached.

Most of us expected mining stocks to get hit when the broad averages finally collapsed. Take a look at the hourly chart of this stock before you despair, however, since the carnage has been far worse for companies not in the gold or silver business. I've reproduced a chart of Apple on this page today as well, and as you can see for yourself, Silver Wheaton's chart looks no worse. We continue to hold the September 42/46/50 call butterfly for $1.04.

Having legged into the September 42/46/50 call butterfly spread four times for 1.04 over the last few weeks, we have a chance to make as much as $1184 if the stock is trading around 46 when the options expire on September 16.  The position would be profitable in theory with the stock trading anywhere between 43.04 and 48.96, but we lose outside of that range, although no more than $416 total no matter what.  Do nothing further for now.

Trying to squeeze the last dime of risk from our butterfly spread will cost us, since the eight September 46 calls we were looking to short for 0.79 are now trading for around 0.37.  In any event, I'll recommend that you offer them short today for 0.45 -- two for each pair you hold of Sep 42/Sep 50 calls. If we get our price we'll have four Sep 42/46/50 call butterflies with $400 of profit potential each and a maximum loss of no more than $68 -- still pretty good odds. Our maximum profit would come if the stock recovers into the mid-40s by early to mid-September.  FYI, the nearest Hidden Pivot support where we might expect a strong turn this morning lies at 34.23 -- 31 cents beneath yesterday's bottom.   If I revise the strategy given above, I'll signal in the chat room intraday and also mail out an alert to all who are signed up to receive them.  (You can do so by clicking on "Contact Us" on the home page.) _______ UPDATE (11:23a.m. EDT): The stock gapped up to 36.10 on the opening today, making the September 46 calls an easy short at 0.45, since they were worth more than 0.60 at the high. We now hold four September 42/46/50 call butterfly spreads for a 0.68 debit apiece. Do nothing further for now. The stock looks bound for a Hidden Pivot support at 31.74. (60m, A=40.50 on July 25 at 9 a.m. EDT, B=35.43 on July 25 at 10 a.m.) _______ FURTHER UPDATE (1:22 p.m. EDT):  I'm retracting the short sale of September 46 SLW calls, since I've just heard from a subscriber who had a 0.45 limit order go unfilled. My guess is that the market makers read SLW's head fake perfectly and were unwilling

A feisty Silver Wheaton got nearly all of the attention during this session, since we hold a partial butterfly spread in the stock. One more trade is needed to complete the position, and once we’ve shorted some September 46 calls against what we already hold, we’ll have a virtually riskless bet on SLW’s continuing rise into early autumn. We also looked at the stock as a possible trade in real time, since it was stealing up on an opening-bar peak that obviously had trapped many bulls (and short-covering bears).

We hold four September 42 calls @ 1.32 and four September 50 calls @ 0.26 that will turn into a risk-free bullish butterfly spread if and when we are able to short eight September 46 calls for 0.79 or better.  Continue to offer the calls good-till-canceled, since a short-squeeze opening could cause them to fill at our price or even higher.  FYI, the rally from Friday's low has the potential to hit 41.13 (daily, A=34.54, B=40.24) if the stock closes for two consecutive days above 38.28, a Midpoint Pivot.  For your interest, I've used Larry McMillan's option calculator (see inset) to determine approximately how much the stock would have to sell for in order for the September 46 calls to be trading at our short-offer price of 0.79.  The fact that the calls were selling for around 0.45 yesterday with SLW at 37.45 gives them an implied volatility of 50.8.  If you plug that volatility into the calculator and run the stock at 39.35, it yields a theoretical value of 0.79 for the calls. In practice, however, if the stock takes a few days to climb to 39.35, call volatility would likely diminish, requiring SLW to somewhat exceed 39.35 to get our option order filled.