HudBay has more downside potential

May 12th, 2010 – Comment

I agree with you that HBM has potential as a short but make sure to take some target practice before you strap on the six gun and head out to the gun fight.


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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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hudbay

Lou,

Using my limited knowledge of technical analysis, it looks like HudBay Minerals Inc. (HBM-T) broke out of a descending triangle formation. More specifically, it has fallen below the 200 day moving average and breached support at $12. It looks like the next level of major support is at $8 to $9. Is this a good stock to short and what will it take for it to reach support at $8 to $9?

Many thanks,
Norman

 

Hi Norman,

You have made good use of your pattern recognition skills to identify a potential opportunity to short the shares of HudBay Minerals Inc. ( HBM TSX) but it caught support at $10.00 and now the question is which way is the wind blowing?

hbm

The three year chart provides a number of signals that HBM was on the verge of reversing the advance from the December 2008 lows. The RSI signaled that the stock was overbought in September / October of 2009 when it hit a high of $17. At the same time the MACD was turning below the signal line providing another indication that the uptrend was coming to an end.

The stock is currently trading below the 50 and 200 day moving average but did catch a bounce off of $10.00. You identified the descending triangle correctly on the chart so give yourself a pat on the back for the lessons you have learned and please continue to seek out more knowledge in the field of technical analysis. Check out the Canadian Society of Technical Analyst for ways that they can be of assistance in your skills development.http://csta.org/

 

hbm2

The RSI on the six month chart indicated that HBM was oversold as we came into May of this year but if you look at the last candlestick the long upper shadow suggests that sellers were in control of the trading on May 11, 2010 and that the bounce off $10 is meeting resistance.

I agree with you that HBM has potential as a short but make sure to take some target practice before you strap on the six gun and head out to the gun fight.

Happy Capitalism!

Categories: Technical Analysis
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