Is Now the Time to Buy Silver Wheaton Corp. (SLW) Stock?

Silver Wheaton Corp. (USA) (NYSE:SLW) just touched its 40-day moving average, meaning it could be an opportune moment to buy the silver stock

by Alex Eppstein

Published on May 19, 2016 at 11:33 AM

Silver Wheaton Corp. (USA) (NYSE:SLW) has been shining on the charts this year, and options traders have gotten behind the outperforming silver stock. At the same time, however, the shares recently pulled back -- possibly presenting a buying opportunity. Below, we'll examine SLW's potential buy signal more closely.

As stated previously, SLW has been trekking higher, following in the bullish footsteps of the precious metals sector. Year-to-date, the silver stock has added 53.5% to trade at $19.06, and hit an annual high of $21.14 as recently as May 2. All the while, the shares have been assisted by support at their 40-day moving average.

Speaking of which, SLW pulled back to this key trendline earlier today. Historically, this tends to be a bullish signal for the stock. Looking back three years, the shares have touched the 40-day six times, and in the ensuing week, have finished higher five times. On average, the silver stock has advanced 2.1% during that time frame.

Options traders certainly appear to have lofty expectations. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 4.16 SLW calls for every put -- with the resulting call/put volume ratio ranking in the 73rd annual percentile.

Elsewhere, on the sentiment front, the brokerage crowd is firmly behind SLW, with 12 of 14 analysts calling it a "buy" or better -- and not a single "sell" recommendation to be found. Also, short interest is very low, representing less than 2% of Silver Wheaton Corp.'s float. That said, short interest did rise 27.8% in the latest reporting period, so some of the recent call buyers may be short sellers looking for upside protection.

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