Nautilus losing its buoyancy

Mar 26th, 2010 – Comment

I think patience will serve you well until the selling is behind us. Watch the MACD, fast stochastics, and the volume for signals that its time to head to surface.


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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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Nautilus

Hi Lou:

I  would appreciate  it if you could give me some insight into Nautilus Minerals. This is an interesting company in the area of exploring for minerals under the seafloor using their unique drilling and scooping method. The process is simple and the potential profit is huge.

Recently the company’s old CEO and founder, David Heydon, signed an agreement with Diamond Field to jointly explore seafloor minerals. Nautilus took a plunge on the news. Apparently the company has over $200 million on the book and the total number of outstanding shares is about 100 million. Therefore each share should at least be worth $2.00 discounting the discoveries the company announced in January.

Would you recommend I buy the stock on the dip or should I wait?

Thanks you and Happy Capitalism to you too!

Fred  in Vancouver

 

Hi Fred,

Nautilus Minerals Incorporated ( NUS TSX) tells the story of man’s ambition to mine the seafloor which has been around for close to 50 years and perhaps longer. Back in the 1960′s I remember talking to my father about the idea as it circulated through the maritime industry where he worked.  Unfortunately over the last five decades there hasn’t been an ounce of base or precious minerals  produced economically from under the sea.

NUS

The three year chart is generating a sell signal with the double top and the break below support at $2.10. The stock did have a good run from $1.00 but met resistance at $2.50 and currently  it looks like it needs some air to regain its buoyancy. The chart also provides a good example of a stock getting too far ahead of its support as it spiked to the January highs.

 

 

 

 

NUS3

The six month chart tells the tale of a stock that is pulling back making lower highes and lower lows. You can see the double top and the break below the 50 day moving average. Neither the  MACD or the fast stochastics are indicating a trend reversal to the upside.

NUS needs to catch a ledge like Indian Jones or it could fall to $1.52 before it finds support. Average daily volume is 128,000 shares which the stock hasn’t been able to meet or beat recently. What we know is that a stock needs volume to go up.

It can have volume and go down but it must have volume to go up. In a sense what we are seeing is a buyers strike which is also evidenced by the downward trend on the RSI. At the peak in January the RSI signaled an overbought situation where buyers were scrambling to get on board but that enthusiasm has wained.

The company has told us that they expect to begin production in 2012. I think patience will serve you well until the selling is behind us. Watch the MACD, fast stochastics, and the volume for signals that its time to head to surface.

 

Happy Capitalism!

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