Dynasty Metals and Mining trading on thin volume

Nov 24th, 2010 – 1 Comment

The biggest head scratcher for me is the thin volume. DMM has to get investors excited about the propsects of their efforts and get some committed buying flowing into the stock.


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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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Hi Lou,
Your comments on Dynasty Minerals would be appreciated. It seems to me like an inverted Head & Shoulders  ran from about May to mid September. Now for a second time hitting that $4.40 resistance and interesting enough, about the area it should have travelled up if recognizing the inverted head and shoulders move.
Think this will climb above  $4.40 ?

Thank-you

Rob

Hi Rob,

Thanks for the assignment. Dynasty Metals and Mining Inc. (DMM TSX) has been advancing their gold and sliver targets in Ecuador and in August of 2010 began shipping  gold dore to a refinery in Canada. Gold dore is a semi- pure bar of gold and silver that is further ehanced at a refinery. In April of this year the company raised $15 million in a financing of 3,750,000 units priced at $4.00.

Each unit was made up of one common share and a one half of a share purchase warrant. The warrant has a strike price of $5.00 and is good for 12 months from the closing date of the offering. Lets examine the charts to get a better sense of trend, support, and resistance.

The three year chart depicts the recovery of the stock from the late 2008 lows in the $1.20 range.  The chart also clearly indicates that the ascent has been choppy at best. Examining the ten year chart confirmed the all time high of $10.00 in 2007. What that tells me is that DMM has a lot of work to do to challenge $10.00. It hit a high of $6.00 in late 2009 but then began a retreat taking it to $3.40  in early August of 2010  where it caught a bounce which started another advance.

The six month chart provides a view of the recent action in the trading of DMM. What we have to be aware of is that over the last thirty days the volume in the stock has been thin. The average daily volume of 78,000 shares has only been surpassed in eight sessions. Not what I would call robust demand.

The MACD has provided buy and sell signals along the way. In late August investors who follow the indicator could see that  the MACD had  crossed above the signal line and that DMM had caught a bounce off support at $3.40. On the sell side the MACD and RSI both indicated a shift in momentum and a retreat from the $4.40 high in late September. The move produced a 29% return in 30 days.  It is hard to find fault with that.

As to your question regarding a break above $4.40. The biggest head scratcher for me is the thin volume. DMM has to get investors excited about the prospects of their efforts and get some committed buying flowing into the stock. This has been a choppy trader providing opportunities for the fleet of foot. The next level of resistance is at $5.00 so if you ride it for a break above $4.40 make sure you grab some profits when available.

Happy Capitalism!

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