Sellers in control of Scorpio Mining.

Jul 9th, 2010 – Comment

Right now investors are in a selling mood and the best you can hope for at the present time is for the stock to hold onto support at $0.625!


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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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scorpio

Hi Lou,
Can I have your opinion of Scorpio Mining? It has encountered a short-term problem
with one of the mills. It showed a good profit last quarter and seems to have a good management team. Is there upside to this stock?

Thanks,
Eitan

Hi Eitan,

Scorpio Mining Corp. (SPM TSX) has come off a nice run which produced a healthy five bagger from the late 2008 lows of $0.20 to the spike high of $1.00 in the April 2010. But that’s behind us, and to your question as to the go forward prospects for SPM it has support at $0.625 which it really has to hold on to.

 

spm

The three year chart provides a view of the advance and the building of a base at $0.625 starting in September of 2009 and then the spike high in April of 2010. The MACD signaled the shift to the downside as it started to turn lower on April 19, 2010.

 

 

 

 

spm2

The six month chart illustrates a number of patterns worth mentioning. You can see the double top with the lower highs and lower lows that screamed for investors to get off the ride and preserve capital. The breach of the 50 day moving average in May and the subsequent retreat below the 200 day moving average in June pretty well made it clear that all the love was gone.

SPM caught a bounce off $0.625 in early June but then met resistance along the downtrend line at $0.77.  The problems at the mill reported in early July really hasn’t been the big problem with the value of the shares. Its more a case of experienced investors in small cap mining companies reading the tale of the tape and signals generated from the charts.

SPM will fix its problems at its mill and continue to develop its property in Mexico. The only question that really matters for you is when will the buyers come back to drive the stock higher. Right now investors are in a selling mood and the best you can hope for at the present time is for the stock to hold onto support at $0.625

Happy Capitalism!

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