Gran Columbia Gold Corp. not so grand

Dec 21st, 2011 – Comment

The lesson to take away from this case is that holding a stock in a steep decline is a bad plan.


About the Author

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.


Read the author's full profile.


Further Research

Read more about Precious Metals.


 

 

Hi Lou,

Would you like to check Gran Colombia Gold, GCM. Something strange is happening with this stock. I do not understand it.
Yours truly,

Jerry

 

 

Hey Jerry,

Gran Columbia Gold Corp. (GCM TSX) has been in a free fall since late 2010 which brings me to the main lesson in this post. Do not fight the tape! If a stock is going down you don’t need to understand why. You need to make a decision to get off the ride and preserve capital.

The charts will provide evidence to support a buy, sell, hold decision.

 

The three year chart has so many warning signs stapled onto the margins its screaming sell me! The top in December of 2010 was quickly followed by a breach of the 50 day moving average later in the month. The 50 day moving average has since provided resistance all along the decline.

The break below support at $1.60 in April was then followed by the formation of a death cross in May when the stock traded at $1.00. 

Regardless of the fundamental story, news released by the company, or hype on the bull boards you need to respect the trend. In this case the trend has been down for just over a year. If you had been  a buyer at the December 2010 top you would have lost close to 87% of your capital to this point.

The lesson to take away from this case is that holding a stock in a steep decline is a bad plan.

 

The six month chart isn’t very encouraging either but there does seem to be a a trade forming. The RSI is moving out of oversold territory and the MACD is turning higher. But you would have to have a huge risk appetite to be a buyer.

GCM seems to have a tiger by the tail with their Maramoto gold project in Columbia. Their forecast is that production will go from 90,000 ounces in 2011 to 510,000 ounces in 2016. However until the stock breaks this downtrend its a speculation not an investment.

Make it a profitable day and happy capitalism!

Categories: Precious Metals
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media