Buying pressures continue to reign supreme on Wall Street as bullish euphoria has failed to evaporate – much to the bears’ frustration. Major equity indexes remain on a steep climb higher while the commodity market remains mixed at best; year-to-date, some commodities like corn and crude oil are clinching onto minor gains, while others like gold and silver remain in red territory [for more market news and analysis subscribe to our free newsletter].
With most equities either sitting at or headed towards new highs, many are hesitant to jump in after such a stellar run-up. Luckily, the investable universe is wide and not every security has enjoyed wild gains thus far in 2013. Silver-mining bellwether Silver Wheaton Corp. (SLW) presents an intriguing opportunity at the moment that warrants a closer look from contrarian investors looking to get a piece of the action on Wall Street.
Consider Silver Wheaton’s five-year daily chart below. The most important observation to make is the fact that this stock has been stuck in a fairly well-defined trading range for the majority of the last two years; notice how SLW has rebounded off the $30 level (blue line) and also failed to summit the $40 level (green line) on several occasions since the fourth quarter in 2010. While it’s true that SLW has traded as low as $25 a share in this same time frame, for the most part, this stock has been able to rebound higher upon flirting with support near the $30 level.
Risk-tolerant traders may wish to take a long position at current levels for two reasons: first and foremost, traders can manage downside risk closely by setting a stop-loss right underneath SLW’s recent low or at $30 a share depending on risk preferences; second, traders can favorably position themselves in anticipation of a rebound, and SLW has some attractive upside potential seeing as how it’s trading near the bottom of its longer-term range [see 5 Commodity Trading Mistakes You Could Be Making].
Conservative investors may wish to stand back until SLW is above its 200-day moving average (yellow line) or $35 a share to avoid getting caught in a dead-cat bounce. From a technical perspective, this stock has immediate support along the $30 level, followed by $25 a share; in terms of upside, SLW has major resistance around $40 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Disclosure: No positions at time of writing.