Northgate Minerals facing resistance at $3.00

Oct 25th, 2010 – Comment

At this point I would say take the advance from these levels but don’t expect to break through $3.00 quickly.


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Hi Lou,

I bought NGX @ $3.10, presently its trading at $2.99 in spite of the overall gold price moving north.
What prospects do you see in this stock, should I hold on, or should I cut my losses and get out. What are the long term prospects (3-4 weeks) of this stock?

Regards
Sam

Hi Sam,

Northgate Minerals Corp. ( NGX TSX) has been moving sideways for most of 2010 after an impressive advance through 2009 when it ran from $0.75 to the high of $3.75.  Lets examine the charts and see if they can provide enough information to help with your decision.

The three year chart clearly illustrates the sideways trading pattern that  dominated the chart for 2010. What is clear is that NGX didn’t get much of a sustained lift from the advance in the price of gold. The stock is currently testing support at $2.80 and if that fails it will make its way to the next level of support at $2.50. The break below $3.00 is a concern in that it is a long term support level with reasonable strength. At this point the issue is that what had at one time provided support will now provide resistance to an advance. Not the best scenario in terms of the desire to recapture losses.

The six month chart depicts the rise to $3.60 in September of 2010 plus signals indicating a reversal was developing. The MACD clearly was turning lower by mid September as NGX was peaking and by the end of September it generated the get out of Dodge pattern at $3.45.  Currently the MACD is starting to bottom out and it appears a shift in momentum is about to shift from the sell side to the buy side.

I am not sure what would have attracted you to buy at $3.10 or when you bought it but at this point you are looking at a 10% haircut. So the question you have to answer is what is your cry uncle price? 

All the good news about pushing up production to 300,000 ounces a year beginning in 2012 is baked into the price and that hasn’t held the stock up. Yes the MACD looks to be turning higher but the stock is trading below its 50 and 200 day moving averages and there is now resistance at $3.00. The last candlestick on the chart is a long legged doji which indicates that there is great indecision in the market.

At this point I would say take the advance from these levels but don’t expect to break through $3.00 quickly.

Happy Capitalism!

 

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