Viterra Inc. coming to the end of its period of seasonal strength

Nov 17th, 2010 – Comment

What we need to see is if VT will catch a bounce off the 50 day moving average and move back towards profit generation.


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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,

My question regards Viterra Inc. VT-T. I have been following this stock. Went in when it was $8.47 and a very strong signal to buy. The stock ran up to $10.00 and is now back to &9.50 and still some downwards pressure. Given all the indicators to buy and the market sector, is it time to get out or just hang on a bit?

Thanks Louis

 

Hi Louis,

I last undertook an analysis of Viterra Inc (VT TSX)  on May 3 of 2010 for Ron. At that time it was clear that VT was in a downtrend and it was advised to preserve capital by getting off the slide and look for another prospect. The charts indicate that after May 3 , 2010 VT retreated from $8.50 all the way down to $7.00, a 17% haircut. Hate when that happens! Lets see if there is a better opportunity at this time.

The three year chart  illustrates the move to a rock bottom at $7.00 in early July and then the bounce off that level of support to the recent highs of $10.00. The uptrend that generated a 42% return came during a period of seasonal strength for the agricultural sector but it did start early. Typically the agricultural enjoys a seasonal sweet spot from August to December. The question that now hangs over the stock is if the move started early, will it end early?

The six month chart provides a great view of the uptrend but also suggests that the uptrend has been breached. For those who got in after the July lows the breach puts a caution flag on the track and provides incentives for some to take profits while available. The MACD and RSI are both signalling a shift in momentum from buyers to sellers. Neither indicator is currently suggesting a reversal in the selling that has been in motion for the last seven trading days.

What we need to see is if VT will catch a bounce off the 50 day moving average and move back towards profit generation. If it doesn’t hold at these levels it will test support at $9.00.  At this point you are sitting on a gain of 11.8%. There could be more in it but it will take some effort to breakthrough $10.00.

What I always advise at these points is when you are unsure how to proceed, throw to cash. When you lock in your gains or cut your losses you get out of the rain and have the opportunity to dry off and let the market give you new information free of risk.

Happy Capitalism!

Categories: Agriculture
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