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Good News / Bad News for Silver Bulls

by Brett on May 11, 2011

When you get waxed 30% in a couple of weeks, what good news could there be?

Here’s the bright-side – for the silver bulls that didn’t get margin called, you’ve seen solid support at the 50-day moving average (blue line below) over the past 24 months:

silver price chartEverytime silver has touched its 50-day MA over the past 2 months, it’s bounced off it.

(Source: StockCharts.com)

The bad news?  It’s another $8 down to get there!

To put things in perspective, a correction down to $27 would put silver at its 50-day MA.  It’d have to correct all the way down to $18 to get to its 200-day MA.

Silver was WAY overdue for a correction, so this recent price action is not exactly surprising (except for those, myself included, who wonder what took so long).

Everyone’s favorite silver stock, Silver Wheaton (SLW), had more of a measured rise.  As a result, its recent decline has not been as violent, either.

Silver Wheaton SLW Price ChartSilver Wheaton, a silver royalty company, is everyone’s favorite “call option on a call option”.

(Source: StockCharts.com)

I hope to use this correction – however long or deep it is – to dollar cost average into some Silver Wheaton.  If you believe the longer term silver bull market remains in play, SLW is a well run company with a favorable royalty-based business model, that’s well worth checking out.

And as you can see from the chart above, there’s no shortage of price action!


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