Downtrend is broken

Dec 16th, 2009 – Comment

At this point they have not yet determined if the resources are economically exploitable so they have to continue to drill up their deposits and expand their resource base.


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ecu

Hi Lou

I have been trying to get gold or silver stocks into my portfolio. I thank you for your review on Great Panther Resources, that is one to add to the watch list. The other I have been keeping an eye on is ECU Silver Mining, ECU-T, have you looked at this mine. If so or if you plan to, please let me know. Is there any truth to the manipulation of their stock as I hear on various chat boards.

Appreciated,

Michael

 

Hi Michael,

Glad you could make use of the Great Panther Resources ( GPR TSX) report. I was happy to see that you have put it on your watch list which tells me you are looking for idea generation but will conduct your own due diligence. Just because I conduct research on a stock at the request of a reader does not mean you should go out and buy it. It simply means that you need to do a lot more work to make sure it meets your investment criteria.

Once again, a request had me start the analysis with a look at  the charts for ECU Silver Mining Inc. (ECU TSX), which are interesting enough to warrant further  investigation.

ecu2

The three year chart provides a view of the long decline that started in 2007 and finally made a break to the upside in October of 2009. When a long term trend line is breached either to the upside or the downside its a call for further examination to confirm that we have a trend reversal. In the case of ECU the bottom is in.

The breakout in October was in response to ECU increasing its production by restarting one of its mills at their Velardena properties in Mexico. The company is pushing tailings and other materials through their mills to generate revenue. At this point they have not yet determined if the resources are economically exploitable so they have to continue to drill up their deposits and expand their resource base.

From their current reported quarter they have 40M silver equivalent ounces measured and indicated and another 391M inferred. Management sees the potential at 570-930M silver equivalent ounces but that has yet to be proven. ECU closed a $12m private placement on December 09,2009 so they have cash in the till to fund further development.

ecu3

The three month chart provides a view of the move up since October and a golden cross on the chart in November. The stock is holding support at $0.70 and some resistance at $0.74. The MACD looks to be bending towards a move up but isnt there yet.

 

 

 

ag4

The outcomes for ECU will be determined by how successful the management team is in advancing their corporate goals. As far as the speculation that the stock is being manipulated I think you are best served ignoring the issue. The question you have to answer is are you comfortable with the risk profile at ECU and is this the management team that will get you to the penthouse of profit.

The chart for silver clearly shows a healthy uptrend and now ECU needs to push more material through its mills, expand its resource base and take advantage of the opportunity.

 

Happy Capitalism!

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