Opti Canada Inc. needs to retest the low

Jan 21st, 2011 – 1 Comment

The best outcome at this point would be for the stock to retest $0.50.


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Hi Lou,

What are your thoughts on OPTI Canada? With the company producing again, is now a good time to buy?

Emil

 

Hi Emil,

I last commented on OPTI Canada Inc. (OPC TSX) on May 21, 2010 for Steve. I mentioned at the time that there was no reason that I could see to be buyer and that has been proven up pretty convincingly given the sell off that investors have suffered through. Lets go back to the charts and see if there is a reason to be a buyer at this time.

The three year chart illustrates the tale of woe that investors have suffered through over the last eight months. The big drag on the stock is the debt it has to refinance . There is $525 million that has to roll over in 2012. $300 million that has to be placed in 2013 and a whopping $1.75 billion that needs a home in 2014. The last financing the company reported cost 9.75 % which by my calculation means that at those rates the principal owed doubles in 7.38 years. You really have to peddle your bike to stay ahead of that monster!

There is talk on the bulletin boards that OPC is in play and I have to agree that with a 35% interest in a long lived deposit that someone could be interested in the assets. At this point I would say that taking a postion in the company is a straight up gamble. It isn’t an investment and it isn’t even a speculation. Its a gamble pure and simple. Knowing that, lets see if the six month chart can tell us anything else.

The six month chart ain’t no oil painting. The stock has been meeting resistance along its 50 day moving average three times since November of 2010 as its tried to move higher. The best outcome at this point would be for the stock to retest $0.50. A retest would  generate a double bottom which is a  trend reversal pattern. A double bottom would make this chart more interesting.

If you want to gamble, OPC is a candidate. But remember that if you buy a ticket for the clubhouse at Woodbine, you can enjoy a fine buffet while gambling.

MAKE IT A MASSIVE WEEKEND AND HAPPY CAPITALISM!

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