Candax: The operative term is ax

Dec 7th, 2009 – Comment

Capital preservation is one of the most important things you can do when a stock you own is working against you. Sell it before it chews up your money. When a stock breaks below support its time to evaluate your original reason for buying and start playing defense.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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candax

Hi Lou,
What are your thoughts on CAX, Candax Energy, lost cause? Only viable at higher energy prices? Tough going from a high of $1.05 in July 2008 to current $0.06.Any insight is appreciated.

Cheers,
Andrew

Hi Andrew,

The only salvageable asset when it comes to Canadax Energy Inc. ( CAX TSX) is the lesson to be learned from the wreckage. CAX is a prime example of a company hitting a rough patch on both a macro and micro level.

The macro problems for CAX over the course of the last 18 months has been the wild ride in energy prices and the consequences of the the global credit crisis that hit all the players in the energy sector. Of course the better capitalized companies were better able to withstand the havoc.

The micro problems at CAX have been related to their operations in Tunisia where production has been below forecast and they have tapped out their available sources of credit. The company continues to report as a going concern but the go forward plan depends on its ability to restructure its balance sheet. Talk about getting hit every which way!

CAXThe three year chart is no oil painting but does offer a few good lessons about support  so lets make sure you get the lesson you paid for.

CAX broke support at $0.70 in July of 2008. In October of 2008 a death cross, where the 50 day moving average breached the 200 day moving average, signaled a trend reversal to the downside.

The lesson is that you had enough time to sell and preserve capital. Capital preservation is one of the most important things you can do when a stock you own is working against you. Sell it before it chews up your money. When a stock breaks below support its time to evaluate your original reason for buying and start playing defense.

CAX plunged another knife into the heart of investors in September of 2009 when it broke support at $0.10.

CAX2The six month chart provides a great view of the breach of support at $0.10 and the stock trading below its moving averages.

Take this one out behind the woodshed and give it a good tax loss sale. After the creditors are done with CAX there won’t be much left.

Happy Capitalism!

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