I am way up on Pulse Seismic and it seems on fire currently. While I like the dividend I am wondering if it time to sell. Perhaps buy back in at a lower price. As I bought it at $1.20 & 1.79 the dividend is rich for me. Lou what do you think?

Bill  Surrey, BC

Hey Bill,

Congratulations on a great score! Pulse Seismic Inc. (PSD TSX) is a leader in the Canadian seismic data library sector. The have 28,300 square kilometers of high quality 3D seismic data that generates 87% of sales. The stock spiked to a 52-week high of $3.91 on after catching a bounce off of support at $3.10 on May 16, 2013. But the move has been short lived and I can see why you are concerned about your profits.

A case study of the charts will provide better insight as to how best to manage this investment.

The three- year chart tells the tale of a profitable advance that started in February of 2012. The MACD and the RSI signalled the shift in momentum to the buy side as investors like yourself caught a ride on the escalator to the penthouse of profit. The uptrend line has provided support which has been tested but not breached over the last fifteen months.  There has also been good support along the 50-day moving average. The aggressive advance that started on May 16 was accompanied by above average volume of 273,210 shares. On May 23rd 949,450 shares traded as the stock came off the highs. There were two big blocks that traded hands  at $3.55 that day which represented the bulk of the action. The average daily volume over the last three months has been 84,116 shares.

The MACD and the RSI on the six-month chart both signalled the move higher last week. At this point it appears that the excitement is over. The RSI looks to be moving lower suggesting that more selling is to be expected. The last candle stick on the chart is a long legged doji which indicates that there is uncertainty as to the direction of the market. Bottom line – you are deep in profit take some and as we used to say out west – go buy a hat!

Make it a profitable day and happy capitalism!

Hi Lou,

I purchased AutoCanada in August 2012 & have seen it skyrocket. Do you see it continuing to go up?

Thanks.

Carolyn

Hey Carolyn,

Congratulations on a great buy! You are sitting on a juicy gain which brings your question into focus. AutoCanada Inc. (ACQ TSX) is a consolidator in the the auto dealership space. They currently own and operate 30 dealerships under the Chrysler, Nissan, Audi, and Volkswagen brands. At this time Ford, Honda, and Toyota are not allowing the company to buy into their systems. The company intends to increase its operations by 20% over the next two years by continuing to roll up dealerships where the principals are looking to get out of the business. There are a variety of reasons that dealers are motivated to sell including pending retirement, increasing pressure to invest in new technology, and manufacturers leaning in on them to upgrade their stores.

What has contributed to the uptrend in the stock besides buying existing dealerships has been the rejuvenation of the sales process by the company. They have engaged a younger cadre of managers who are promoting their stores through a variety of channels. Greg Carrasco, the dealer principal at New Market Nissan, has been using a blend of social media and innovative radio programming to attract younger car buyers. It doesn’t take a doctorate in business to know that the right people will make you money and drive the bottom line.

As sales targets have been met or exceeded the company has been generous with shareholders increasing the dividend in nine consecutive quarters and beating the street on earnings in the last three quarters.

An examination of the charts will provide greater insight as how best to manage this investment.

The three- year chart paints the picture of a sweet advance that has been in play since November of 2011 when the shares were trading under $4.00. What is worth noting is that the 50-day moving average has provided support all along the uptrend. The aggressive move higher that started in March of 2013 came in reaction to the release of  Q4 2012 results which was the second consecutive quarter that earnings beat the forecast. Q1 2013 released on May 6, 2013 provided further fuel to the fire driving the shares up 17.5% in just over two weeks.

The six month chart has a couple of patterns worth mentioning. The stock has been taking a breather over the last couple of trading days as it consolidates around the $28.00 range. The MACD and the RSI are signalling that at this point the stock may have harvested all the available buyers and that a pull back may be in the offing. What we may be seeing is a case of all the good news having been baked into this cake and the market waiting for more good news to take the stock higher. The next event on the calendar will be the release of Q2 2013 in August.

You asked if the stock will continue to go up. At this point it looks like ACQ has gotten ahead of itself with a spectacular run that started at $17.00 in March providing investors with a better than 64% return in two months. I would suggest that taking some of your gains off the table would be prudent.

Make it a profitable day and happy capitalism!

Hello Lou,

I hold some Allied Nevada Gold shares which I bought at around $32. They are currently trading at around $9.00 and dropping a few cents everyday. Should I be buying some more to average down my cost or should I sell and take a loss. Where do you see the stock going in the next 6 to 12 months.

Your opinion will be very much appreciated.

Thank you

Gulam

Hey Gulam,

Thanks for the assignment. Allied Nevada Gold Corp. (AVN TSX) has baptized investors in their tears. To answer your question on averaging down, I don’t recommend it. You have already taken a bad beat on your original investment you can leave it there in hopes of a recovery but don’t chase bad money with good. Use the money you would have put into more AVN and buy a blue chip divided paying stock to achieve a better balance with your assets. With respect to how to manage your loss if you have capital gains to offset then you should consider a tax loss sale.

A study of the charts will provide guidance on how best to proceed and will provide some tools that you should be using to ensure that you don’t step on another bear trap!

The three-year chart illustrates the steep decline that started in the fall of 2012 as the price of gold hit resistance near $1,800 and began an aggressive decline. The entire precious metal sector has been in the penalty box but adding to the woes at ANV was the decision to phase in the development of the facilities at their mine in Nevada. Worth noting for future use are the sell signals generated by the RSI and the MACD as the stock rolled over in the fall of 2012, the break below support along the 50 and 200-day moving averages, the death cross that formed in January of 2013, and the break blow support at $25.00. All together that is one ugly chart!

The six-month chart isn’t offering much encouragement to add to your position. The downtrend line is very well established and every attempt to move higher has failed. The RSI and the MACD are also not indicating that the trend is about to reverse itself. In terms of an outlook for the next six to twelve months it is not something that I can help you with. The analysis provided is essentially a snapshot of all the information available today on trend, support, and resistance. What I can tell you is that the trend is down and the support is weak. Act accordingly.

Make it a profitable day and happy capitalism!

Hi Lou,

I own some Northern Dynasty Minerals and would like your advice as to whether or not it is a wise idea to buy more in order to average down.

I value your opinion and look forward to your answer.

Anna in Montreal

Hey Anna,

Thanks for the assignment and the kind words. Both are greatly appreciated. This will be the second time I undertake a study of Northern Dynasty Minerals Ltd. (NDM TSX). The last time was on June 17, 2011 on a request for my comments from Binh . The shares were trading at $8.30 and had given up a lot of ground from the all time high near $21.00 in February of 2011. The research conducted at the time indicated that the stock was in a downtrend and it was advised that taking profits off the table when available was always a good strategy. The best case scenario outlined in the post was for the stock to hold support at $8.00 and build a base. If $8.00 failed to hold then a retest of $7.00 was sure to follow.

Unfortunately the shares failed to hold support at any level through 2011 and into 2012, hitting a 52-week low of $2.23 on August 14, 2012. The stock caught a bounce  off the lows and popped to $5.28 on September 20, 2012 before dropping to its current level.

You asked if you should average down and I generally do not recommend it. You already have a position that is underwater. You would best be served not chasing bad money with good. Look for a lower risk opportunity for the funds you have worked so hard to accumulate.

Another run at the charts will provide great depth to help you with your decision.

The three-year chart tells a tale of woe for investors who failed to sell and preserve capital. There are a number of patterns visible on the chart that identify NDM as a meat grinder. The established downtrend, the death cross that surfaced in March of 2011, and the resistance along the 50 and 200-day moving averages are all warning signs to avoid buying the stock.

The six-month chart is not providing much evidence that NDM is about to mount a new advance. There is what appears to be a double bottom that has formed but it is not enough to tip the scales towards a buy decision. The company has a long row to hoe in the development of their major copper gold property in Alaska.  If you like the story hold what you have but don’t add more to your position.

Make it a profitable day and happy capitalism!

Lou,
May I please have your thoughts on BNP. I have held this asset for some time but of late it as been deteriorating rapidly – is this because of its exposure to natural gas or something else I should be aware of?

Thanks

Jack

Hey Jack,

This will be the third time that I examine the case for Bonavista Energy Corp. (BNP TSX). The last time was on January 23, 2012 when the shares were trading for $22.26. The RSI indicated that the shares were oversold but the MACD was not signalling a shift in momentum to the buy side. The stock offered a dividend yield of 6.5% and it was advised to wait for a test of support at $22.00 before making a decision. Unfortunately support did not hold and the shares traded down to $13.00 by July of 2012.

The shares did catch a bounce off $13.00 as natural gas prices began to recover but the increase in the price was not enough to save the dividend. In January of 2013 the board of directors cut the dividend to $0.07 from $0.12 which sent the shares down to a 52-week low of $12.24 in February. The stock then started another run off the lows that took it to over $16.00 in May of 2013.

Another study will help determine how best to proceed with this investment.

The three- year chart indicates that the stock has broken above the 50 and 200-day moving averages and is testing resistance at $16.00. Also worth mentioning is that a golden cross is developing although not currently formed.

The MACD and the RSI on the six-month chart are both rather neutral at the moment and failing to generate much in the way of guidance. BNP has been a heart-breaker for many investors who got sideswiped by the declining price of natural gas. There has been some recovery in the price of gas and a lot of speculation that it is the hot spot in the commodity space.

The three- year chart for natural gas depicts a double top which at best suggests a pullback and at worst a trend reversal.

BNP is a stock that requires constant surveillance. It has suffered with the falling price of natural gas and took another hit when the board decided to cut the dividend. To crib from Rod Stewart – the dividend cut is the deepest.

Make it a profitable day and happy capitalism!

Good morning Mr.Schizas,

I would like your opinion on NYX.I have a small position in this equity @ $20.00.
Should I hold on or sell now?
Thank you,
David

Hey David,

Thanks for the assignment and congratulations on a great trade! NYSE Euronext ( NYX NYSE) is operating under a takeover offer from the IntercontinentalExchange Inc. (ICE NYSE) which surfaced in December of 2012. The original offer had a number of cash and stock options with a cap on cash in the deal. I would suggest that you consult with investor relations at NYX to get the latest on the offer. When considering how to manage a takeover you have to realize that there are a lot of moving parts.

A big deal that reduces competition will get a lot of regulatory scrutiny especially in Europe. Then the deal has to pass the gauntlet of market participants who are opposed to the transaction and then the shareholders have to sign off. Finally there is the further uncertainty related to a competing bid. You never know who might have sharpened their pencils and decided to make a competing bid. That’s pretty heavy traffic on the way to the close. The trading price of NYX is ahead of the December offer price as the shares of ICE are up substantially.

A review of the charts will help you decide if the stock is a hold or a sell.

The three- year chart depicts the explosive advance that the shares have enjoyed since December. There aren’t any signals that I can see suggesting that there is more to come or that there is a severe breakdown in the making.

The MACD and the RSI on the six-month chart are both bending lower indicating that some selling is coming into the stock. At this point I would say it is a pullback to support at $38.00 not the start of a trend reversal.

In my experience when someone asks if they should be selling it tells me they want to sell but are afraid of leaving something on the table. I always advise taking profits when they are available. You are sitting on a very attractive gain which at this point is clouding your judgement. You can take your orignal investment out of play and leave your profits in the stock or you can take all of your money off the table.

I have left money on the table more than once and never thought twice about it. It is a near impossibility to call an absolute bottom or an absolute top.

Make it a profitable day and happy capitalism!

Hi Lou,

I enjoy your column, and value your advice.
Could you comment on, Questcor Pharma.
Thanks,

John

Hey John,

Thanks for the assignment and your support. Both are very much appreciated! Questcor Pharmaceuticals Inc. (QCOR NASDAQ) is a one trick pony stock.  Most of its revenue is derived from the sale of Acthar gel which is used to treat nearly twenty conditions including multiple sclerosis, and infant spasms. The stock took a hit last fall as the company’s promotional activities were put under review and there were reports that a major insurance company had revised its thoughts on Acthar. The stock has been in recovery mode  doubling the 52-week low of $17.25 it hit in September of 2012.

A review of the charts will indicate  if the aggressive bounce off the lows have more to give.

The three-year chart has one outstanding feature that is very noticeable. The advance off the September lows appears to have formed an ascending triangle which suggests that there is more to this up move. Also of note is the resistance that has formed at $35.00 and after that $40.00 is the next barrier that has to be overcome.  Another pattern visible on the chart are the buy signals that were generated by the MACD and the RSI in October of 2012 as buyers took control of the market.

The six-month chart provides a close-up of the nascent start of a golden cross. The MACD and the RSI both signalled a move higher in April as the stock tested support at $27.00 generating a 26.5% return in less than a month. A nice get for those who acted on the opportunity. If you like the QCOR story you want to keep in mind that it has one horse in the race. Anything happens to Acthar it happens to shareholders worse. Currently the MACD and the RSI are indicating that buyers a still accumulating this stock. But that doesn’t meant the situation can’t change at any moment.

Make it a profitable day and happy capitalism!

Can you update any information on Veresen?

Manuel

Hey Manuel,

Thanks for the assignment. This will be the second time that I investigate the possibilities associated with Veresen Inc. (VSN TSX). On October 15, 2012 Len wanted to know what my thoughts were concerning the stock. It was trading at $13.11, offering a 7.72% dividend yield, but the MACD and RSI were neutral at best. It was advised that buyers take a cautious approach and wait for the stock to break above resistance at $13.50 with conviction. Owners of the stock were instructed to maintain surveillance on their shares to ensure the sanctity of their dividend.

By December 12, 2012 the shares hit a 52-week low of $11.22 providing a very attractive entry point. Once again patience was rewarded. Another look under the hood of this mid- stream energy infrastructure company will inform my thoughts on VSN.

The three-year chart provides a number of interesting patterns worth mentioning. The bounce off the 52-week low started a new advance that has produced a better than 19% capital gain in just under five months go along with the dividend. In addition the MACD and the RSI generated buy signals at the lows which benefited investors who make use of these indicators. Finally a golden cross has formed which suggests there could be more gas in the tank.

The six-month chart depicts the move through the 50 and 200-day moving averages as well as resistance at $12.50 that occurred in January of 2013. The golden cross surface in late February and by late April VSN broke above resistance at $13.00. The next levels of resistance come in at, $13.50, $14.00 and then at $14.50. The MACD and the RSI are both indicating that there may be more to come with this stock. The company will report Q1 on May 8, 2013. Make sure to mark that on your calendar.

At this point I would say that with a golden cross on the chart, the momentum indicators indicating that buyers are taking renewed interest, and the shares breaking above resistance that there is enough evidence to support a buy.

Make it a profitable day and happy capitalism!

Good morning Mr. Schizas,

I have enjoyed your columns over the years and your time on television.

I have owned Bristol Meyer for several years, and it is doing quite well, what do you think of the stock and where it is going?

Thank you very much,

Frank

Hey Frank,

Thanks for your support over such a long period . Bristol-Myers Squibb Co. (BMY NYSE) has provided you with substantial capital gains and generous dividends since you have owned it. Management has been aggressively fighting generic competition for some of its franchise compounds through their research at the lab bench and with strategic acquisitions. The name of the game in the pharmaceutical space is keeping the pipeline full of products and it appears that BMY is meeting that challenge.

An examination of the charts will help inform the analysis of your investment.

The three-year chart illustrates the aggressive move higher that started in late December of 2012 as the company was granted approval for a new blood thinner by the FDA. That bit of good news was followed by a Q4 beat in late January and a penny increase in the dividend in February. All those developments have added $10.00 to the share price in four months for a better than 30% gain. In December of 2012 the RSI and MACD were both signalling that buyers were taking control of the market.

The six-month chart provides a close-up of the pattern of base building followed by an advance that has played out twice since December. Worth noting is that the MACD and the RSI are both indicating that there is more to come. BMY will report Q1 2013 on April 25 which is the next flex point on the calendar.When I examined the charts going back to 1983 I didn’t see much resistance to hold this one back. In summary you found yourself a running horse – don’t shoot it!

Make it a profitable day and happy capitalism!

Hi Lou,

What are your thoughts on Rona? I bought some last summer and it’s now back at the same price that I bought it at. Do you think that it’ll go back up or should I sell before it goes down any further?

Jenn

Hey Jenn,

Thanks for the assignment. I last reviewed the case for RONA Inc. (RON TSX) On September 10, 2012 when the shares were trading for $12.62. Rena wanted to know if she should hold for the $14.50 offer from Lowe’s Companies Inc. (LOW NYSE) or sell. The research conducted on her behalf suggested that a stock trading below an offer price wasn’t getting an endorsement from investors that a sweeter offer was forthcoming. Also noted was the concern that the appreciation of the stock price was driven by the offer rather than organic growth from the company’s core business.

It was advised that the hold or sell decision would be determined by her investor profile. A more conservative investor would take profits when offered and an investor with a larger appetite for risk would hang in for a higher potential reward. As things developed the The Lowe’s offer was pulled and the hope that a sweetened offer would emerge crashed and burned. There have been changes in the executive suite at the company, closing of some stores, a move to a smaller store format, as well as a recent downgrade on its debt to junk status.

All that activity makes another run at the charts a good investment.

The three-year chart offers a couple of features worth noting. The retest of support at the rock bottom near $9.00 after the deal with Lowe’s was scuttled gave rise to a new advance to resistance at $12.25 by February of 2013. Worth mentioning are the sell signals generated by the MACD and RSI at $12.25.

The six-month chart paints a picture of a downtrend that has provided resistance to any advance since the February highs. In addition take notice of the death cross that surface in April. The question at this point is if support at $10.25 will hold. Neither the MACD nor the RSI are indicating a move higher at this point. RON will report Q1 2013 in early May and is expected to report a loss on restructuring charges.

Given the intense competition in the home improvement space, a negative technical picture, and the tendency of Quebec based corporations to attract undue attention from government and its supplicants I would be looking for new fields to plough.