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Why the market doesn’t love Silver Wheaton

A file photo of silver bars.

LISI NIESNER/LISI NIESNER/REUTERS

Hi Lou,

Seems everyone loves SLW. Except the market.

Could you provide your views on this one please?

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Bob

Hey Bob,

This will be the third time that I examine the case for Silver Wheaton Corp. since November of 2010.

The last time was on Dec. 10, 2012, when the shares were trading for $35.41. Warren wanted to know if the $34.00 – $35.00 range was a good entry point for a long-term investment. The analysis indicated that a trade was shaping up and that on a long-term basis SLW was an accumulate. A trade did surface but was quickly followed by a bout of selling that has taken the stock below $34.00.

Another investigation of the case for SLW will help identify the opportunities and risks associated with this investment.

The three-year chart for silver will help answer your question as to why the market doesn't seem to like the stock. In the Dec. 10, 2012, post it was noted that silver had to break above $35.00 to help drive value into SLW. Clearly that has not happened. The three-year chart for the U.S. Dollar Index was another factor that was mentioned in December with the comment that a breach of 79 would support an advance in the trading value of SLW. The U.S. dollar actually strengthened advancing to 82 taking some of the shine away from silver as a defensive hedge against continued monetary easing by central banks.

The three-year chart for Silver Wheaton illustrates that selling that has plagued the stock since the November 2012 highs. There was a trade that followed the December analysis but the advance to $37.00 in January 2013 was short lived and by February the selling became more aggressive. The February selloff was indicated by both the RSI and the MACD. The next question is: will support at $30.000 hold?

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The six-month chart provides a close-up of the selling that has dominated the chart since mid February. Currently the shares have caught a bounce off of support at $31.00 and the MACD and RSI appear to be making an attempt to turn higher. At this point the stock has to build a base to make a case to invest for the longer term.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

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About the Author
Lou Schizas

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality - and a true believer in the happiness-inspiring powers of capitalism. More

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