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Strategies & Market Trends : Underexposed Technical Analysis

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From: Underexposed9/19/2017 3:44:50 PM
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Should I sell IAMGOLD - IAG or not? - How I arrive at my decision.

I rarely make a fortune on gold stocks. I did make good coin back in 2005 when it eventually ran to $1900/oz in 2011. But back then a blind monkey could have done that... the trick back then was to hold onto those gains.

Like today people thought the gold bubble would burst any time during that period. So I took small gains in the stocks. Gold mining stocks were what I eventually settled on. They had to be producing mines is what I eventually decided. The explorer-type stocks were full of scams...

I did not realize back then how to evaluate the potential of a "discovered" property. I did not realize that it took about 5 years to develop a really good property with:

Relatively easy access to rail or road infrastructure,
A town nearby by to house workers,
lots of available water for the processing of the mine ore
Was it a possible strip mine or underground mine?
If a strip mine, how much overburden was there, if an underground mine, how deep was the ore body?
How large an ore body had been already been defined?
Was the gold in ore rich (grams/tons)?
Was it consistent? or were the results touted only the good ones.

As you can see this is hard to predict when the explorer company is touting some moose-pasture property as a huge gold find.

They always tout their ore body's worth in terms of the current value of the time....BUT who knows what the price of gold will be by the time they would be ready to produce??

Explorers of any metal or oil/gas property are selling dreams not reality. They are not long term holds . They can be short term trades of a few weeks if you are good at market timing but not long term IMHO

Established producing mines are another matter:

You have costs/revenues to evaluate.
You have a defined ore body and either news of expanding the existing body or acquisition of other mines
You have a history of the share price to evaluate.

Much easier to predict.

Always remember that when a stock relies on a single commodity, its share price rise or fall depends on the price of the commodity itself. I have never seen a gold mining stock rise if the price of gold is falling.

So let us look at the price of Gold first



Gold has been rising for most of 2017 but not in a linear fashion. It goes up and falls, rising again, repeat.

You can get seasick following this stock. Currently it is on a down trend....BUT it is at a support at $1315 right now with another support at $1295 -$1305. So I believe the drop in price will stop and not fall below $1295.

The sma's are bullish as you can see in this case red is the bull line and blue is the bearish one.

So while we would like to see the price rising... for long term it does not look disastrous... though if it breaks $1295 it would not be good.

I ignored my rules with this stock and bought it on a bullish rise... not the beginning but the end. Something I don't want to do.

IF I was about to enter the gold market now... I would wait to see if those supports held and see the price of gold rise again.

But we already own the stock (IAG)... so we don't give up on it unless it breaks the supports. If it does we have to get out ASAP.

So now let's look at our stock IAMGOLD to see how it is holding out in this decline.

Financials

Look at its balance/income statements here: IAG Financials

Current debt is nil now and has been so for 4 of the last 5 quarters (Plus)
Long term debt has been declining each quarter for the last 5 quarters (Plus)
Total Revenue is pretty stable over the last 5 quarters (neutral)
Net Revenue was almost break even until last quarter which was VERY healthy $500,000,000 for some reason.

So... what have we learned from this...well the company is reasonably healthy. If you look at the last 5 years it looks pretty good... it is rising out of some pretty bad years.

We are not dealing with a company about to go bankrupt... far from it. They have survived good and bad times for over 10 years.



So from a long term perspective it is rising again...

P&F Chart


The moving average overlays are quite bullish still. The green box is the support band. with $5.90 at the top and $5.40 at the bottom... other than the breadth of this support it is not particularly strong.

Trigger chart




In the upper circle you see that we are in the consolidation phase following a long bull run. It has done what is natural in this phase.... it has gravitated to the 20 day SMA (dotted green line).

If you look at the solid circle below this you will see all three indicators are falling.... this is not a full bear signal, it is bearish but not a full on bear. If the BBwidth was widening as the other two fell that would be a full on bear. This is similar to the chart in the dotted Blue line which eventually turned full bear for a week or so but then recovered.

So this is not serious yet.... it is only a consolidation...so far.


Conclusion

I could go on with 2 more charts (my sentiment chart and ichimoku chart) but they would only show mixed messages of bear and bull signs.

The upshot of this is that I am not prepared to sell right now but I would protect myself with a limit stop-loss order in case this turns truly bearish.

So effective today Sept 19, I am entering a limit stop-loss order for IAMGOLD [NYSE:IAG] triggered at $5.80 and limit at $5.70

I hope you found this discussion useful

Underexposed
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