Western Potash Corp. worth watching

Nov 11th, 2011 – Comment

The charts are not suggesting a screaming buy but are certainly worth putting on your watch list for a breakout with a stronger uptrend.


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Hi Lou

Western Potash: High then low for a long time then a big jump in the last few days. Has the ship sailed?

Thanks

Doug

 

 

Hi Doug.

Western Potash Corp. (WPX TSX) is a classic example of a speculation. They have control of land with prospects as a potential potash property. Their Milestone project is located in close proximity to existing potash mines in Saskatchewan and they recently released a positive Pre-Feasibility Study.

The conclusion of the third party evaluation is that WPX has an asset at Milestone of sufficient size and grade to support forty years of production at a defined rate. The initial capital expenditure estimate is $2.75 billion with production beginning in 2015. The company has sufficient financing in place to complete a feasibility study.

What WPX doesn’t have at the moment is a producing mine spitting out cash. The speculation is that they will conclude their development on time and that market conditions will support the project once it is completed. Another speculation is if the company will be taken out by a bigger player. Takeover rumours have circulated over the years, and tires have been kicked, but no offer has been tendered.

A review of the charts will provide some insight as to how this speculation might progress.

 

 

The three year chart outlines the advance that began in August of 2010 at $0.40 and hit a high of $1.80 on February 14, 2011. Since Valentine’s Day it’s been the case of a stock coming off the highs and trading sideways in a range with support at $1.10 and resistance at $1.40.

 

 

 

 

The six month chart depicts the bounce off the lows at $0.70 in October to the November high of $1.40  and the pull back to $1.30. The advance has taken WPX above the 50 and 200 day moving averages and a pennant has formed. A pennant is a continuation pattern and it appears that the shares might have more in the tank.

The charts are not suggesting a screaming buy but there is enough evidence to say it is certainly worth putting WPX on your watch list for a breakout with a stronger uptrend.

 

Take time on this Remembrance Day to honour those that have served, and those that are serving, to preserve our freedom.

 

 

Categories: Agriculture
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