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Is Silver Wheaton Making A Play?

12/17/08 09:00:49 AM
by Koos van der Merwe

With US automakers holding out tin cups and former NASDAQ chairman Bernard Madoff alleged to have paupered his clients via a giant Ponzi scheme, we can understand why investors are scared to invest. Here's something to consider.

Security:   SLW-T
Position:   Accumulate

The white collar arrests made last week stunned the investment community when former NASDAQ chairman Bernard Madoff was arrested for allegedly running a $50 billion Ponzi scheme and when law firm owner Marc Dreier was arrested for allegedly selling $100 million worth of sham investments. This is probably just the beginning.

So if you cannot trust those money management companies at the top of the pyramid, who can you trust? There is only one person, and that is yourself. But how many investors have the time to do their own research? How many investors look for shortcuts and invest with a fund of funds manager, only to find that their hard-earned savings no longer exist simply because due diligence was not done by that manager?

So if you were a victim of such a scam, you will become more risk-averse with whatever monies you have left and will most probably stay away from the stock market until the crisis is over. But the temptation is always there. Interest rates are low, so you look for a stock to invest in that you hope will give you a good return. Silver Wheaton (SLW-T) is a company you could watch with that in mind.

FIGURE 1: SILVER WHEATON, WEEKLY. Here's a perfect Elliott wave count with a C-wave bottom.
Graphic provided by: AdvancedGET.
Figure 1 shows a perfect Elliott wave count with a C-wave bottom two weeks ago. This means that the stock price should now start rising in a five-wave impulse wave over the coming years. The relative strength index (RSI) has moved from the oversold level and given a buy signal by breaking above the 32 horizontal line, confirming the coming bull run.

FIGURE 2: SILVER WHEATON, DAILY. Here's a perfect wave count for the bear run.
Graphic provided by: AdvancedGET.
Figure 2 hows a perfect wave count for the bear run and confirms that the trend is now bullish. However, with the RSI almost at the 70 level, suggesting that wave I up could soon be complete, one should far rather wait for a wave 2 before buying the stock. A wave 2 can be as much as a 72% correction of wave I. So once the top of wave 1 has been identified, chart a Fibonacci retracement from the low of wave C to the high of wave 1 for possible entry levels.
Silver Wheaton is a stock to place on your watchlist, and it may be a buy for the future.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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