IAMGOLD is trading in a range with resistance at $20.00

Sep 29th, 2010 – Comment

The current trend in the shares of IMG is a range bound pattern with resistance at $20.00 and support at $16.50.


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DEAR LOU,

PLEASE ADVISE IF I CAN ENTER IAMGOLD NOW THAT IT HAS HAD A GOOD PULLBACK.

IS IT A GOOD STOCK AT THIS PRICE OR SHOULD I AVOID IT. MANY THANKS.

ANTONIA FROM LAVAL

Hi Antonia,

IAMGOLD  Corp. ( IMG TSX)  has benefited from the move in the price of gold, as has the whole sector, that started in April of 2010 as it moved from $1,100 to over $1,300 today. The current trend in the shares of IMG is a range bound pattern with resistance at $20.00 and support at $16.50.

The three year chart provides a view of the resistance at $20.00 and the bounce it caught as gold prices started to move higher in April. What now has to happen at IMG is that they need to bring new production to market  and control the cost of that additional production so that they can better leverage the opportunity at these prices. In a presentation to the Denver Gold Forum on September 21, 2010 IMG increased their output forecast but also increased their projections for the cash cost per ounce.

When I last examined IMG on April 05, 2010 for Sonia, the stock was in the downtrend and was not exhibiting any signs of a trend reversal. The point that I want to make is that any analysis is a snapshot of the information available at that time and the trends and indicators available at the moment. What is absolutely required in the management of investments is constant surveillance for changes in the environment.

Gold continues to surge as actions by the U.S. Federal Reserve fail to provide support for the greenback. At the most recent meeting of the central bank interest rates were kept at between 0.00% and 0.25%. In addition the Fed commented that they would use quantitative easing to provide more liquidity to the system to avoid a dip back into recession. Quantitative easing is Fed speak for accepting questionable assets as collateral for lending to banks. Lets also keep in mind, as we get giddy with anticipation of higher prices,that trees don’t grow to the sky and it should not come as a surprise that at some point we should expect a pullback.

The six month chart depicts the range bound pattern that IMG has settled into since May of 2010. The long term resistance at $20.00 will take quite an effort to get beyond. You should expect that it will pullback when it comes into that range. A stock that trades in a sideways pattern can be very profitable if you are looking for a higher rate of transactions.

MAKE IT A MASSIVE FALL AND HAPPY CAPITALISM!

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