Royal Nickel Corp. currently less than regal

Aug 5th, 2011 – Comment

Maintain your surveillance and look for a turn if the shares bounce off $1.00


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Hi Lou,

Royal Nickel has been on a downward trend for a while. Is it time to jump in or wait longer? They have a very experienced management team and supposedly a world class asset.

Thanks,

Brendon

 

 

Hey Brendon,

Royal Nickel Corp. (RNX TSX) does seem to have, as you suggest, a huge nickel deposit in Quebec. The 100% owned Dumont Nickel Project is forecast to produce four percent of global output by 2016. The mine is expected cost $2.3 billion and produce 140 million pounds of nickel per year over the twenty five year projected mine life. Pay back on the investment is estimated in just over four years.

The management team is stacked and packed with former Inco Ltd. hands which provides some comfort to investors. What we have to keep in mind is that no one controls the price of the commodity, not even the most experienced manager. The global nickel complex is expecting new supply coming to market as mines that have been in development start to ramp up. In addition there is the nickel pig iron issue that could put pressure on refined nickel prices.

The charts will provide some guidance as to direction, support, and resistance.

 

 

 

The one year chart indicates that the shares of RNX first came to market in December of 2010 after their initial public offering. After an initial surge of enthusiasm the stock has been selling off aggressively. There is an established downtrend line and consistent resistance along the 50 day moving average.

 

 

The six month chart provides a closeup of the recent trading action. What is noticeable  is that the MACD has provided some strong buy and sell signals for profitable trades. At this point the best case scenario would be a retest of the lows at $1.00. that could wash out the sellers. Neither the MACD nor the RSI are currently generating a buy signal and the volume has been thin over the last sixteen session.

With a downtrend established, resistance along the 50 day moving average, no indications of a shift in momentum towards buying, and thin volume  now is not the time to be chasing RNX. Maintain your surveillance and look for a turn if the shares bounce off $1.00

 

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