I know you always have a backlog but I will appreciate it lots if you can please analyze Lucara Diamonds before its June 29th sale of the Lesedi La Rona. Lucara has become the single biggest elephant in my holdings, when is it a good time to pull the lever?
Wishing you the best,
Thanks for requesting another examination of Lucara Diamond Corp. (LUC TSX). The last time you asked for my thoughts was on May 5, 2014 when the shares were trading for $1.98. At the time the charts were exhibiting a textbook example of a wealth generating uptrend. In May of 2013 the stock had moved up and through the downtrend that had been in place since February of 2012. LUC had enjoyed support along the 50-day moving average as it advanced from $0.60 to $1.98 on May 5, 2014.
Based on the signals generated by the MACD and the RSI the research indicated that the leg up had more in it. Retrospectively that was the right call as the stock touched a high near $2.75 by August of 2014. As one might expect that was as good as it got until November of 2015 when the shares started a new leg up on the excitement generated by the discovery of the Lesedi La Rona 1,109 carat diamond.
In terms of the auction of the Lesedi La Rona on June 29, 2016, the tennis ball sized diamond that was pulled out of the Karowe Mine in Botswana, I think that the sale is already priced into the stock. Even though the Lesedi La Rona is the biggest diamond found since 1905 and has an estimated value of US$73,251, 000 the future of the company will be determined by how many more big and little rocks will be harvested from the companies operations. The proceeds of the sale might be used in a variety of ways including investing in its operations, issuing a special dividend, as well as other options.
A probe of the charts will inform my opinion on LUC.
The three-year chart depicts the break above the downtrend line in November of 2015 and the golden cross that followed in December. The stock has enjoyed support along the 50-day moving average since January of 2016 advancing to a 52-week high of $4.37 in early June. What is evident is that LUC has pulled back from the high and is retesting support along the 50-day moving average.
The six-month chart pulls focus on the retest of the moving average and the overbought condition in place since April. At the moment the MACD and the RSI are indicating that we can expect selling pressure to continue. You mentioned that LUC has become the biggest elephant in your portfolio which brings to mind the need to capture profits when available.
You may not want to sell your entire position but think about selling enough to get your adjusted cost basis down to zero. You can then look to start a position in a new stock with the profits you have harvested.
Next time I will inspect the particulars regarding Savaria Corporation (SIS TSX) for Peter.
Make it a profitable day and happy capitalism!