A Bullish Bounce in Silver

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Your Bull Market Alert portfolio recovered somewhat during the last, holiday-shortened week. Both Nabors Industries (NBR) and ELEMENTS Rogers International Commodity Agricultural ETN (RJA) ended the week higher. Millicom International (MICC) and Novo Nordisk A/S (NVO) also rose as well. Overall, most of your positions are HOLDs, and will remain there until they creep back above their 50-day moving averages.

This week’s Bull Market Alert pick shifts your attention back to silver through Vancouver-based Silvercorp Metals (SVM) — a star performer among the world’s silver mines.
 
Few asset classes have been as much in the headlines in 2011 as silver. “Poor man’s gold” hit a 31-year high of $49.82 per ounce in late April, before collapsing more than 30% to a low of around $32. But last week, silver staged a comeback, posting a weekly gain of $2.90, or 8.3%. That was its best week since the week of April 18.  
 
Silvercorp is China’s largest primary silver producer, having produced 1.05 million ounces of silver in the company’s most recent fiscal quarter. That capped a record year of 5.3 million ounces of silver production and marked the company’s fifth consecutive year of production growth. In doing so, Silvercorp sustained its enviable five-year track record as the lowest cost producer of silver among its industry peers.
 
Silvercorp’s cost structure is remarkable. In Q4 of 2011, the company produced silver at a cash cost of negative $7.61 per ounce — and that number actually fell from earlier in the year. And with $206 million in cash on its balance sheet, no long-term debt, and strong operations, Silvercorp sees a world of opportunity to expand its business.
 
That all said, this bet on Silvercorp is primarily a bet on a technical bounce in silver and silver stocks. Last week, the stock broke out of a clear downtrend that had taken the stock from its 52-week high of $16.32 to under $10 a share. Since then, the stock has recovered to over $11.00. Other, more short-term technical indicators also show that odds are that the stock is set to make a substantial recovery.
 
So buy Silvercorp Metals (SVM) at market today, and place your stop at $9.40. If you really want to push the pedal to the metal on this recommendation, buy the December $12 calls (SVM111217C00012000). Here’s a word of warning: hold onto your hat. This is a seriously volatile stock.
 
Portfolio Update
 
Alexion Pharmaceuticals (ALXN) ended the week 3.87% lower. With the stock trading below its 50-day moving average, ALXN remains a HOLD.
 
Alliance Resource Partners L.P. (ARLP) rose 0.50% this past week. For now, though, trading below its 50-day moving average, ARLP is a HOLD.
 
UltraShort Euro ProShares (EUO) pulled back slightly from your entry price on Wednesday. Remember, the purpose of this position is to hedge on your European banking positions. Bad news from Europe will be good news for you here. EUO is a BUY.
 
Bank of Ireland (IRE) ended the week 5.07% lower. The stock rallied sharply on Friday upon news that it will unveil plans early this week for its junior bondholders to exchange 2.8 billion euros ($4 billion) in debt for shares in the bank. Trading below its 50-day moving average, IRE remains a HOLD.
 
Millicom International (MICC) ended the week 2.0% higher. With the stock technically strong, and the global telecom sector coming back into vogue, Millicom remains a BUY.
 
Nabors Industries (NBR) rose 2.8% this week. I am looking to time our exit on this, as it bounces back toward the $30 level. Until then, NBR is a HOLD.
 
National Bank of Greece SA (NBG) fell 2.26% this past week. Look for this position to bounce big if new austerity measures are announced this week. NBG remains a HOLD.
 
Novo Nordisk A/S (NVO) ended the week slightly higher. This is a solid company with terrific fundamentals. Trading below its 50-day moving average, NVO remains a HOLD.
 
Rayonier Inc. (RYN) fell 2.68% this past week. Japan’s lumber-related imports are supposed to increase to the highest level since 2008, and RYN is listed as one of the companies likely to benefit from this increased demand for wood raw material. RYN is BUY.
 
ELEMENTS Rogers Intl Commodity Agri ETN (RJA) rose another 1.2% this past week. Trading just below its 50-day moving average, this bet on agricultural food prices remains a HOLD.
 
Sohu.com (SOHU) fell 3.29%, hit by negative sentiment surrounding Chinese stocks. Seriously oversold, this stock is due for a bounce. Still trading below its 50-day moving average, Sohu is a HOLD.
 
Toyota Motor Corp. (TM) rose 2.88% this past week. Trading above its 50-day moving average, Toyota is a BUY.
 

 

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With the European debt crisis rearing its head yet again, this special Bull Market Alert position opens a bearish bet against the European currency through the UltraShort Euro ProShares (EUO).
This exchange-traded fund (ETF) seeks to replicate twice the inverse performance of the EUR/USD daily price change.
Put another way, when the euro goes down against the U.S. dollar,

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