IAMGold Corp. is not yet in recovery mode

Jun 3rd, 2013 – Comment

Currently the trend is down with resistance along the trend line, the 50- day moving average, and at $6.00.


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Hi Lou,
Like may of us I wanted to have some exposure to a Gold Stock. I chose to buy IAMGold and picked it up in and around 11 and then again at 8:50.
What are your thoughts on this company and where there headed in the next 12 months.

Thanks,

Nick

 

Hey Nick,

Thanks for the assignment. This will be the third time that I examine the case for IAMGold Corp. (IMG TSX). The last time was on September 29, 2010 on a request from Antonia. The shares were trading for $18.16 and Antonia wanted to know if it was a good time buy. The research conducted on her behalf indicated that the shares were range bound with support at $16.00 and resistance at $20.00. It was advised that she trade for profit within the range until there was a break through resistance.

As we came into 2011 the range shifted with support at $18.00 and resistance at $22.0o which lasted until the advance met resistance at $24.00 in late 2011. But that was the end of the good times. Through all of 2012 and into the first half of 2013 producers have under pressure as the price of gold has been in a steady decline.

You mentioned buying at $11.00 and again at $8.50. I generally do not recommend averaging down. Putting more money into a losing position simply concentrates your risk. You are better off to diversify your risk by finding another opportunity outside the sector where your expectations have not been met. I also want to advise you that I can’t provide guidance for an extend period of time. Niles Bohr the noted physicist  is often quoted for the comment that predictions are very difficult – especially about the future.

Another review of the charts will provide information about the trend, support, and resistance that pertain to you investment in IMG.

 

 

The three year chart has a number of patterns worth examining. The double top near $24.00 in late 2011 provided a signal to the informed investor that it was time to get off the ride and find shelter. The death cross that surfaced in late December of 2011 as the shares were testing support at $16.00 was another signal that the case for IMG was getting weaker. There was a bounce off of $10.00 in mid 2012 that ran to $16.00 by late 2012 as gold prices recovered somewhat but that was as good as it got. By mid November the rout was on chasing the shares down to their 52- week low of $4.72 on April 18, 2013.

 

 

 

 

 

 

The six-month chart illustrates the resistance that has been encountered along the 50-day moving average. Currently the trend is down with resistance along the trend line, the 50- day moving average, and at $6.00. These are not great indications that its time to buy more or that you can expect a rapid recovery of your losses. On a seasonality basis you want to pay attention to the July through September time frame which is a period of strength for gold stocks.

 

Make it a profitable day and happy capitalism!

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