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As gold soars toward $1,000 dollars an ounce and back into the headlines, silver is quietly approaching a key technical breakout and may offer even greater upside potential.

First, let’s take a look at the valuation gap between gold and silver.

Using the 2007-2008 time frame as a guide,  $950 gold is equal to an $18.75 silver price. If gold can hold the $950+ level here, silver could rally another 35% in merely closing it’s “valuation gap” to gold.

Technically, this rally started with silver finally breaking through it’s 50 day moving average in early January. And with silver also breaking through it’s 200 day moving average last week at $13.45, it’s clearly in a powerful uptrend.

I’m using this trading channel as my guide on this trading leg of the silver move.  Technically, the 200 day moving average is setting perfectly at support on the bottom of this channel. If gold can break $1,000 dollars an ounce, I think silver is potentially set up for a parabolic move up, in filling the value gap to gold.

And for those who trade the silver ETF, let’s take a look at the SLV chart.

The SLV chart is very interesting. SLV closed today at $13.99 and that’s a key technical turning point for the silver ETF. $14 has been both key resistance and key support during this cycle. A breakout, with a close holding above $14,  could confirm that silver is about to rapidly close it’s  “value gap” to gold.

One key characteristic that I like on the SLV chart above,  is that the volume on this rally leg is both bigger and better than what we saw in early 2008, when SLV broke $14 and ran all the way to $20+.

With gold getting all the headlines and all the media pundit recommendations, don’t be afraid of rotating some of those profits that you may be taking off into this gold rally, back into silver, SLV, or silver stocks.

The silver stock that I find most interesting is Silver Wheaton which trades under the symbol of SLW.

• SLW is the largest pure silver miner, with 100% of revenue from silver.
• It has the highest leverage to the price of silver, with each 10% move up in the silver price, increasing cash flow by 26%.
• Significant stakes in 6 of the top 35 silver mines in the world.
• All in cash costs under $4 per ounce, with no ongoing capital expenditures, or exploration costs.
• No hedging.
• Reserves and resources of over 1 billion ounces of silver. 382 million ounces proved & probable. 230 million ounces measured & indicated, and 448 million ounces of inferred resources.

Let’s take a look at the SLW chart.

SLW / Silver Wheaton had been tracking the price of silver perfectly up and through late January.  The last time silver was $14, SLW was over $12.  That gives SLW 50%+ upside in just closing it’s “valuation gap” to silver.  Of note,  last week UBS raised it’s price target on SLW from $7.50 to $11.50.

SLW is both cash flow and earnings positive. It will grow it’s production from 15 to 17 million ounces in 2009, to approximately 30 million ounces by 2013. Silver Wheaton is unhedged, and with it’s hybrid/royalty model, has all in cash costs of under $4 per ounce. SLW is the premiere investment vehicle to leverage the price of silver.

You can access Silver Wheaton’s Q3 2008 quarterly report here:

http://silverwheaton.com/userfiles/file/2008Q3FinancialStatementsSilverWheaton.pdf

And their most recent investor presentation here:

http://silverwheaton.com/insitepresent/09-01-20SLwPresentationFINAL.pdf

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