Yamana Gold Inc. needs to start beating expectations to reverse the current selling pressure

Feb 27th, 2013 – 2 Comments

Regarding your comments on earnings, my research indicates that over the last four quarters the company has missed estimates three times and met expectations once.


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Hi Lou,

I own Yamana in my portfolio and am encouraged by recent earnings and the companies outlook for production in 2013. I’d like to hear what you have to say about the company.
Thanks,

Judi

Hey Judi,

This will be the fourth time since January 25, 2010 that I have examined the case for Yamana Gold Inc. (YRI TSX). The last analysis was conducted on February 7, 2011 when the shares were trading for $11.70. Jim wanted an update and if I would be a buyer at prevailing price. It was identified that the stock offered a lot of trading opportunities and had been range trading with support at $10.00 and resistance at $13.00. Also mentioned was that the MACD had been effective in generating buy and sell signals making it an indicator worth watching. Finally it was noted that if YRI could break above resistance at $13.00 it could run to $15.00 without much to hold it back.

A review of the charts will provide greater insight into the opportunities with YRI.

 

The three-year gold chart is the place to begin the analysis as it is the underlying resource that drives all the efforts at the company. In fiscal year 2012 YRI produced 1.2 million gold equivalent ounces. The cash cost per ounce of $245 is by most measures extremely low. The company expects to increase production in 2013 to between 1.44- 1.60 million ounces and to 1.77 million in 2014. The production levels reached next year will become the base expectation from 2015 onwards.

Gold has support at $1,550.00 and just caught a bounce on comments from the central banks of Japan and the United States supporting monetary stimulus. The more paper money that is printed the better the case for precious metals.

 

 

 

The three-year chart for YRI illustrates the move through $13.00 in the summer of 2011 and the advance to $17.00 by September 2011. Note the buy signal generated by the MACD in June and the sell signal generated in September. The chart pattern since the last case study supports the earlier comment that the stock offered lots of trading opportunities and that it was not a stock to buy and hold. Currently the shares are trading in a down channel and are meeting resistance along the downtrend line. Also worth mentioning is the support that has been established at $15.00.

 

 

 

 

 

The six-month chart provides a close up of the downtrend that started in November of 2012 when the stock topped out at $20.50. Once again the MACD provided compelling signals along the decline. Currently the MACD and the RSI are indicating that there could be more buying to come but I would watch for resistance along the trend line. Perhaps the best case scenario would be a retest of $15.00 as a set up for a stronger advance.

Regarding your comments on earnings, my research indicates that over the last four quarters the company has missed estimates three times and met expectations  once. That track record might explain some of the recent selling. Q1 2013 is expected to be released in May.

Make it a profitable day and happy capitalism!

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