Lawsuit Soils Pennant

Oct 7th, 2009 – Comment

Hi Lou – Can you have a look at PZG-T (Paramount Gold) and let me know what you think? I like your thoroughness and unbiased reviews. Much thanks, Mark (Toronto). Hi Mark, Thanks for your vote of confidence it is very much appreciated! Lets take a look at Paramount Gold and Silver Corp. ( PZG […]


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paramount

Hi Lou –

Can you have a look at PZG-T (Paramount Gold) and let me know what you think? I like your thoroughness and unbiased reviews.

Much thanks,

Mark (Toronto).

Hi Mark,

Thanks for your vote of confidence it is very much appreciated!

Lets take a look at Paramount Gold and Silver Corp. ( PZG TSX) which is an exploration stage resource company.Company management is doing what you would expect. They are consolidating their land position and drilling the targets their geological team have selected. Keep in mind they are not profitable.

The major focus of the company’s activities is the San Miguel Project in an established gold district in Mexico. PZG has been diligently consolidating their control of the property and expanding their land position in the district. The company has also been actively drilling targets since 2006 and has increased the resource estimate for the land to 2.6M ounces of gold equivalent.

As an exploration stage company PZG has no cash flow from operations and needs to raise capital to fund their operations. In 2007 they raised over $25M and this year they have raised over $9M admittedly at lower prices then they would have wanted.

The company is also in a face off with Klondex Mines Limited ( KDX TSX) which has walked away from a plan of arrangement that would have seen PZG acquire KDX. Now the deal has become a turning roast dripping cash to the legal teams on both sides of the fight. The old saying in the capital markets is don’t invest in a lawsuit! You can never be sure of the outcome and they are generally a distraction.

pzg

The three year chart shows a pennant formation with a break to the upside as we came into September.

pzg2

The three month chart gives us a better look at the gap up from the pennant producing a healthy 23% gain on the move. The stock moved off the highs as investors reacted to the good lovin gone bad KDX story and it is now testing support on its 50 day moving average which we want it to hold.

The other factor to consider is that today Barclays Chief Technical Strategist Jordan Kotic, who by the way got me involved in technical analysis, called for $1500 gold. At those prices the rising tide will lift all the boats and wash away a multitude of sins.

The current direction of the PZG is down and the MACD isnt indicating a reversal so the best approach if you are looking to buy the stock is to look at support at $1.35 and enter at that level.

MAKE IT A BIG AUTUMN AND HAPPY CAPITALISM!

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