Noront Resources Ltd. the ticker says it all NOT!

Mar 2nd, 2011 – Comment

I would not be tempted to risk capital on this stock. On a technical basis there are just too many things going against it.


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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,

I regularly listen to you on AM640 every morning and I thank you very much for the sobering and inspirational thought that you inject into the economic issue of the day.

Quick question about Noront Resources Ltd. (NOT) and the [Ring of Fire] Chromite discovery:

1. Do you feel that NOT is a viable investment based on their ability to bring Chromite to the market, future Chromite prices, the world supply & demand from major consumers (emerging economies China/India)?

2. Given that there is no spot price for Chromite, how could the ore price be standardized so that mining companies would have some way to project future profit? Do you see this as a near-term or future reality?

Please feel free to post this on your column and thank you very much again for your inspiration.

Kind regards,

Sheldon.

Hi Sheldon,

I last analyzed Noront Resources Ltd. ( NOT TSXV) for Brian  on July 24, 2009 . At the time  it appeared that there was a pennant formation present on the chart. A pennant formation is a continuation pattern that in the majority of occasions results in a further advance. The stock was trading at $1.38 and it did advance to $2.50. But that was then and in the interim the stock has been in a long term sell off.

You have asked two great questions neither of which I can answer, but I can direct you to the charts that will at the very least tell us if we want to put capital at risk with NOT.

The three year chart renders a clear understanding of what is happening to the stock. Its going down and has been for an extended period of time. NOT hit resistance at $2.50 for the second time in December of 2010 and since then it has lost 66.8% of its value. Ouch!

The old saying on the street is that the best time to buy a stock is when it is going up. Clearly this is not the case with this stock. There is resistance all along the downtrend line. Every attempt to move higher has failed. Could NOT make a turn at some point? Yes but its not doing so now and there are no indicators suggesting that it will in the near future.

The six month chart further embellishes the decline. A slow steady loss of value is never a pretty sight. My best guess is that NOT may have to retest support in the $0.60 – $0.55 range before it can attempt a breakout.  I would not be tempted to risk capital on this stock. On a technical basis there are just too many things going against it. A long term downtrend, no signals from the RSI or MACD that it was about to move higher, and finally no reversal patterns to suggest that buyers had taken control of the market. Sellers rule - buyers drool.

Happy Capitalism!

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