Semafo Inc. building a base

Dec 7th, 2011 – 2 Comments

What gives me the most concern at this point is that it appears a bearish descending triangle pattern has formed.


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Hi Lou.,

I was looking at SMF as of late. Is that a double bottom that has formed and has the downtrend been stopped? Will it have to retest $7? They have also initiated a dividend.

Thank you,

Greg

 

 

Hey Greg,

Thanks for the assignment. This will be the third time I have examined the case for Semafo Inc. (SMF TSX). The first was on May 10, 2009 on a request from Bruce. The stock was trading for $2.16 and it was observed that the downtrend had been broken and there was more upside potential.

The second post was published on November 9, 2010 when the shares were trading at $12.45. Pierre wanted to know if there was more in the tank. It was noted that the RSI indicated the stock was overbought and that the MACD was turning down suggesting that the advance was running out of steam.

Retrospectively the first two posts signalled the beginning and the end of a great run. But what a run! Bottom to top it generated a 468 % return. Sweet!

Let’s examine the charts to see what could be in store for SMF.

 

 

 

The three year chart depicts the run that started in January of 2009 and the emergence of a golden cross. All the way up the stock found support along the 50 day moving average until the top in December of 2010.

At this point the downtrend that started in December 2010 has been broken and what has emerged is some base building with support at $7.00.

 

 

The six month chart illustrates the support that has been holding at $7.00. Currently the RSI is not indicating a move higher so I think you have it right when you say that it most likely will retest $7.00.

What gives me the most concern at this point is that it appears a bearish descending triangle pattern has formed. Given that the momentum indicators are not suggesting a shift towards the upside it would be prudent to wait for a resolution of the descending triangle. Finally the dividend is good but needs to be sustained and grown inorder to become a factor. The market sold off on the November 8, 2011 announcement. 

Make it a profitable day and happy capitalism!

 

 

 

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