Spotlight on Sprott

May 28th, 2010 – Comment

SII is having trouble holding onto support so you want to seriously consider how you approach the opportunity. SCP could remount a test of its previous high of $5.00 but it has to get through resistance at $4.50 to do that.


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sprott

Sprott2

 

Lou,

Are you really busy or just ignoring me? I read your column religiously and value your insight on Happy Capitalism. I am trying to get your assessment of SII and SCP (third request ). I’ll keep waiting

Thanks,

Robbie

 

Hi Robbie,

 

Thanks for staying on the case. It is never an issure of ignoring any of the investors who have questions but I am busy, very busy.  Now that time permits lets review Sprott Inc. (SII TSX) and Sprott Resource Corp. (SPC TSX).

sii

The three year chart for SII illustrates the late in cycle IPO of the stock in 2008. Good for the founders perhaps not so good for investors over  the last two years. The shredding of wealth in this case is more a factor of macroeconomic events than management decisions. Nonetheless it always hurt to see shares go from $10.00 to less than $4.00. Currently SII is struggling to stay above $2.70 where it has support going back to early 2009. Not a sign of strength as I evaluate these patterns.

 

 

sii2

The six month chart provides a better view of the current price action for SII. The MACD isn’t indicating that the weakness in the stock is coming to an end at this point. Next level of support is in the $3.50 range.

 

 

 

 

 

spc

The three year chart for SCP tells a different story in that it has gotten a good lift off the lows of late 2008 and provided a nice ride to its recent high of $5.00 where it met resistance and has pulled back.

 

 

 

scp2

The six month chart provides a view of the signal generated by the MACD in March of 2010 that the momentum in the advance was losing steam and that it was time to review the position. The uptrend line had been broken earlier in the month proving another call to action.

SCP got side swiped by what is now being called the ” flash crash” and has caught a bounce off the 200 day moving average and is now meeting resistance on the 50 day moving average. What used to provide support is now providing resistance. I would want to see the stock work its way through $4.50 to give me confidence that the rebound has strength.

SII is having trouble holding onto support so you want to seriously consider how you approach the opportunity. SCP could remount a test of its previous high of $5.00 but it has to get through resistance at $4.50 to do that.

Happy Capitalism!

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