Hi Lou

Western Potash: High then low for a long time then a big jump in the last few days. Has the ship sailed?

Thanks

Doug

Hi Doug.

Western Potash Corp. (WPX TSX) is a classic example of a speculation. They have control of land with prospects as a potential potash property. Their Milestone project is located in close proximity to existing potash mines in Saskatchewan and they recently released a positive Pre-Feasibility Study.

The conclusion of the third party evaluation is that WPX has an asset at Milestone of sufficient size and grade to support forty years of production at a defined rate. The initial capital expenditure estimate is $2.75 billion with production beginning in 2015. The company has sufficient financing in place to complete a feasibility study.

What WPX doesn’t have at the moment is a producing mine spitting out cash. The speculation is that they will conclude their development on time and that market conditions will support the project once it is completed. Another speculation is if the company will be taken out by a bigger player. Takeover rumours have circulated over the years, and tires have been kicked, but no offer has been tendered.

A review of the charts will provide some insight as to how this speculation might progress.

The three year chart outlines the advance that began in August of 2010 at $0.40 and hit a high of $1.80 on February 14, 2011. Since Valentine’s Day it’s been the case of a stock coming off the highs and trading sideways in a range with support at $1.10 and resistance at $1.40.

The six month chart depicts the bounce off the lows at $0.70 in October to the November high of $1.40  and the pull back to $1.30. The advance has taken WPX above the 50 and 200 day moving averages and a pennant has formed. A pennant is a continuation pattern and it appears that the shares might have more in the tank.

The charts are not suggesting a screaming buy but there is enough evidence to say it is certainly worth putting WPX on your watch list for a breakout with a stronger uptrend.

Take time on this Remembrance Day to honour those that have served, and those that are serving, to preserve our freedom.

Hi Lou

I purchased some of this stock when it was in its infancy. I sold enough to cover my costs when it was around 1.90. It hit a high of $2.84 and then dropped to as low as $0 .26.

It is now recommended as a  buy.

Time to buy again?

Thanks

Marty

PS Enjoy your morning comments on 640.

Hi Marty,

This will be the third time that I have examined the case for BioExx Specialty Proteins (BXI TX). The first time was on November 3, 2010 when the shares were trading at $2.74. It was advised that it would be prudent to take some profit off the table given that the stock had generated a very generous return in a short amount of time. In retrospect that was the right call.

The last time I reviewed the case for BXI was on June 08, 2011 for Satinder when the stock was trading for $1.37. It was suggested that it would be best to wait for the release of Q1 results later in the month before making a buy. Again that was the right call.

The question now is whether BXI is a buy at these levels? The charts will provide some guidance for your further evaluation.

The three year chart paints the picture of a devastated landscape. The erosion of capital has destroyed many dreams. The outstanding features are a vicious downtrend and a death cross that formed in March of 2011.

The six month chart isn’t providing a lot of evidence of a trend reversal. The MACD is flat at best and the RSI is headed lower. Volume has not been so robust to suggest that the market is looking to take advantage of these low prices.  I am not seeing enough to indicate that it is worth the risk to buy at this time.

BXI is scheduled to release Q3 on November 16, 2011. You will have a better sense of trend after that.

Make it a profitable day and happy capitalism!

Hello Lou,

Could you please comment on BioExx Specialty Proteins Ltd.

 (BXI-T)

Thanks and Regards,

 Satinder

Hi Satinder,

The last time I posted an analysis of BioExx Specialty Proteins Ltd. ( BXI TSX) was on November 03, 2010 for Ryan. At the time it was suggested that it would be prudent to take some money off the table. The late Ted Carter who was a good friend and the author of ” Successful Stock Market Speculation” always advised that you should get your adjusted cost basis to zero as quickly as possible.

If for example you bought one hundred shares at the cost of ten dollars and the shares ran up to twenty dollars you should sell fifty shares. You would then have one thousand in cash and one thousand in stock. Your profits would continue to be at risk while your original capital would be in your pocket.

Lets examine the charts to see what has transpired since November of 2010.

The three year chart confirms the advice offered in November of 2010 to take some money out of the market. The stock has given up ground ever since and closed at $1.37 on June 7, 2011. That loss represents a 50% decline from the closing price of $2.74 on November 3, 201o.

Make note that the MACD provided a number of buy and sell signals over the course of the retreat.

The six month chart offers a closer look at the downtrend in place since late January of 2011 when the shares traded at $2.60. The MACD and RSI both generated sell signals at the time. Currently neither indicator is suggesting a shift in momentum towards increased buying.

The average daily volume for BXI over the last three months is 786,255 shares. Over the last thirty days volume has been above average on only nine days. In the last three sessions volume has been significantly above average with the stock losing support at $1.70.

What investors also have to keep in mind is that the company is scheduled to report Q1 2011 results on June 9, 2011 after the close of trading. The sense that I am getting is that the aggressive selling ahead of the results indicates that perhaps some in the know, know its time to hit the silk. The release of quarterly results is, as we have discussed many times, a flex point that you need to have on your calendar. The forecast of the two analyst providing their views is for a loss of $0.03 a share. The company has missed the street estimate consistently over the last six quarters.

Given all the factors in play I would wait until the release of Q1 before considering a buy.

Happy Capitalism!

Hi Lou,
I have held Hanfeng  for a couple years and it never seems to go up should I hold or sell?
Your help is greatly appreciated.

Jenny

Hi Jenny,

I last posted on Hanfeng Evergreen Inc.( HF TSX) on March 5, 2010 for Jordy. At the time it was clear that the stock was meeting resistance at $8.00 and Jordy was wondering if he should buy in anticipation of higher fertilizer prices. I advised that the best strategy would be to wait and watch for a breakout. Unfortunately HF didn’t breakout and in fact it broke down taking the stock lower. The charts will tell us what has been and what may be.

The three year chart depicts the breakdown that started with a double top in April of 2010. In early May HF reported its Q3 results which missed the street throwing coal on the decline and taking the stock below support at $7.00.

The stock caught a bounce off support at $5.75 in June – July of 2010 and ran up to $$7.25 but  the advance was short lived.  On November 9, 2010 the stock had another breakdown on Q1 2011 results that once again disappointed. Since the double top in April of 2010 there has been a well established downtrend established. You fight the trend at your peril and right now the trend is down.

The six month chart illustrates the sell off in early November and the bounce off $4.90 in mid December. The advance stalled on resistance along the 200 day moving average and HF is now retesting $4.90.

Before the open this morning February 11, 2011 it was announced that the CFO of the company had resigned. I  suspect that the stock will open lower.  At this point I would say that the best outcome would be for HF to retest the lows at $4.00.

Given the current environment you would be best served going to cash and perhaps looking to get back in at lower levels if it holds at $4.00.

MAKE IT A MASSIVE WEEKEND AND HAPPY CAPITALISM!

Hi Lou,

My question regards Viterra Inc. VT-T. I have been following this stock. Went in when it was $8.47 and a very strong signal to buy. The stock ran up to $10.00 and is now back to &9.50 and still some downwards pressure. Given all the indicators to buy and the market sector, is it time to get out or just hang on a bit?

Thanks Louis

Hi Louis,

I last undertook an analysis of Viterra Inc (VT TSX)  on May 3 of 2010 for Ron. At that time it was clear that VT was in a downtrend and it was advised to preserve capital by getting off the slide and look for another prospect. The charts indicate that after May 3 , 2010 VT retreated from $8.50 all the way down to $7.00, a 17% haircut. Hate when that happens! Lets see if there is a better opportunity at this time.

The three year chart  illustrates the move to a rock bottom at $7.00 in early July and then the bounce off that level of support to the recent highs of $10.00. The uptrend that generated a 42% return came during a period of seasonal strength for the agricultural sector but it did start early. Typically the agricultural enjoys a seasonal sweet spot from August to December. The question that now hangs over the stock is if the move started early, will it end early?

The six month chart provides a great view of the uptrend but also suggests that the uptrend has been breached. For those who got in after the July lows the breach puts a caution flag on the track and provides incentives for some to take profits while available. The MACD and RSI are both signalling a shift in momentum from buyers to sellers. Neither indicator is currently suggesting a reversal in the selling that has been in motion for the last seven trading days.

What we need to see is if VT will catch a bounce off the 50 day moving average and move back towards profit generation. If it doesn’t hold at these levels it will test support at $9.00.  At this point you are sitting on a gain of 11.8%. There could be more in it but it will take some effort to breakthrough $10.00.

What I always advise at these points is when you are unsure how to proceed, throw to cash. When you lock in your gains or cut your losses you get out of the rain and have the opportunity to dry off and let the market give you new information free of risk.

Happy Capitalism!

Hi Lou,

What is it with AW.UN ? I can’t get enough of it. Just like overeating at a fast food joint, I’m scared to eat there three meals a day. However, the units keeps on rising. Are they really selling enough hamburgers to maintain this trend?

Ryan

Hi Ryan,

The A&W Revenue Royalties Income fund ( AW.UN TSX) earns its revenue from the stream of income flowing from 3% of the sales at the 700 A&W Restaurants across Canada. Anytime you can get a gross royalty to any income stream you should seriously take a look at the opportunity.

 One of the factors that is driving growth and enthusiasm for AW.UN has been the introduction of their Multi Site Development Program. The program allows new and existing franchise owners to develop multiple sites in a given area. The initiative moves the development cycle from a single location focus to a regional development strategy.  Currently 77 new locations are scheduled at be opened in the next three to five years in Ontario, Quebec, and British Columbia.

The charts will add another level of analysis to consider.

The three year chart depicts the advance from the October 2008 lows in the $10.00 range to the current high of $21.05. The RSI is showing that the stock is currently overbought and that the units have perhaps gotten ahead of itself. The current leg up  started in October of 2010  just ahead of the Q3 announcement when the board announced a special distribution. As we say in my family, people in the know – know.

At $21.05 AW.UN yields 6% and the board has declared that they will maintain distributions at the current level through 2011 but it was clear that there are no plans for any special distributions. There has been a restructuring that has been approved by unit holders that is designed to meet the new tax rules that come into play at the end of the year.

The six month chart illustrates the move in October from $19.00 to $21.05 which represents an 11% lift. Not bad for three weeks exposure. However it looks like AW.UN has gotten ahead of itself and will need to pull back. Its not that the units have broken the uptrend but simply that there will have to be some adjustment when the special distribution is paid out.

The trend is your friend until it ends. So feel free to head to the drive through and place your order. But like all  investments make sure to look at the chart every day to see if the trend is about to end.

Happy Capitalism!

Lou:
I have enjoyed watching you on television and now your columns through globeinvestor.com. I have owned shares in BioExx Specialty Proteins since last June when the share price was around $0.60 per share. The share price shot up to $2.92 per share a few months ago and it currently sits around $2.72 per share. I would appreciate any insights you would be willing to share about this company.

Ryan

Hi Ryan,

Thanks for your support and kind words, they are greatly appreciated! You have made a nice pile of cash for yourself by investing in BioExx Specialty Proteins Ltd. ( BXI TSX). The company has developed a process that increases the nutritional yield from canola seeds. After the oil is pressed out of the seed, the meal that is left would typically be used as animal feed.

 BXI has patented processes that extract proteins from the meal that produces more economic value to the cycle. It reminds me of the clever folks that developed the processing methods that help extract valuable natural gas liquids, such as propane, out of natural gas increasing value for the producer. The charts will give us a better sense of how best to proceed given that you are sitting on a tidy profit.

 

Three year chart illustrates the advance that investors have enjoyed since April of 2009 when the stock broke above resistance at $0.50 and started the climb to the recent highs. Its always a pleasure to see a chart like this which has been generating great returns for investors. In my books there is nothing wrong with a five bagger.

The six month chart provides a view of the support that BXI has found along the 50 day moving average. It has tested support but caught a bounce higher. If I was holding on to your gains I would take the opportunity to sell enough to pull my original investment out of the market. Professional money managers are always taking cash out of their gains based on what they consider an appropriate weighting for a stock in the portfolios that they manage.

I don’t want you to shoot a running horse but taking your original investment out and putting it into another asset would be considered prudent. Keep up the good work and get back to beating the bushes for new opportunities.

Happy Capitalism!

Hi Lou:

Agrium has had a great run, Does it have any more legs to move significantly higher?

Yoong

Hi Yoong,

You have the story right on Agrium, Inc. ( AGU TSX ). It caught a bounce off support at $52.00 and has made a run to resistance at $75.00. I provided an analysis of AGU on July 30, 2010 for John. At the time it looked like, because of the pending period of seasonal strength that runs from August to December, that the trend that started in early July could run to $75.00 without much trouble. Lets consult the charts to see if there is enough gas in the tank to push through $75.00.

The three year chart clearly illustrates the resistance at $75.00 that has to be overcome if AGU is going to challenge the previous highs in the $115.00 range. The RSI is signalling that the stock is overbought at this time which should not come as much of a surprise given takeovers in the sector.

BHP Billiton’s hostile offer for Potash Corporation of Saskatchewan has investors excited about an offer for all fertilizer companies including AGU. What we have to keep in mind is that some of the hot money in the sector will only stay in the hunt for a period of time. Typically takeover fever breaks at some point.

The six month chart tells the story of a stock that has been very generous to investors who caught the bounce off of $52.00 in early July. The RSI and MACD both seem to be signalling that the buying fever has worn itself out for the moment and that its going to take some work to break through $75.00.

There are still over two months of positive seasonality for AGU and we certainly don’t want to shoot a running horse. Watch the uptrend line for any signs of a breach and be prepared to capture profits before you give them all back in the case of a pull back.

One thing I wanted to address is the need to have constant surveillance on your holdings and prospects. The analysis I conduct is essentially a snap shot at a moment in time. Things change on a daily basis which demands on going vigilance to reduce risk or generate profits.

Happy Capitalism!

Good day Lou

Enjoy your insights. What are your thoughts on potash, specifically Agrium, in the near future (6 months)?

Many Thanks,

John

Hi John,

Your question is well timed given that fertilizer stocks enjoy a period of seasonal strength from August to December. It does appear that the party got started a bit early this year for Agrium Inc. ( AGU TSX). Lets have a look at the charts.

The three year chart illustrates the characteristics of trend, support and resistance. The first is the support at $52 which you can trace back to late 2007. When the price of AGU broke its uptrend in March of 2010 when it met resistance at $75.00, the decline halted once it reached a level where investors had confidence that buyers would emerge. That is what makes the understanding of , trend, support and resistance so important when we look at a chart.

As Jordan Kotick, Head of Technical Strategy at Barclays in New York, taught me many years ago if you can use a ruler you can reduce risk and improve opportunities. So get a straight edge and get in the game!

The six month chart tells the tale of the MACD generating a sell signal when AGU met resistance at $74.00 in March and a buy signal in late June when it hit $52.00. As mentioned earlier it looks like AGU has gotten an early start on its period of seasonal strenght but that doesnt mean that the opportunity is lost.

In fact it strongly suggest that if you are looking to catch a ride you need to know when the plane, train, or bus is scheduled to leave and get to the terminal early in case of a change. As with all factors in the market there are no guarantees that a pattern of seasonal strength will occur.

As I discussed with Brooke Thackray, author of ” Thackray’s 2010 Investors Guide”, and an expert on seasonality, its like quantum theory. When we look at electrons circling the nucleus of an atom we are not sure where the electron is exactly just the probability of where it could be.

The shares of AGU are doing what you would like them to do an over the next six months you will have the opportunity to make a profit. From here it looks like a run to $75.00 before you hit resistance.

Happy Capitalism!

Greetings Lou,

I’ve been in and out of Viterra for years eking out little profits by selling on upswings and buying on dips. I last got in at 9.40 and have watched it drift down slowly. I kind of like their place in the agricultural space and their global position with the ABB purchase. I’m thinking it may plunge to 7.00 if it starts drifting below 8.50….your thoughts? I must admit I’m a real keener when it comes to chart analysis, we all have our faults I guess.

Ron

Hi Ron,

Never apologize for using charts to help reduce risk and run profits! SAY IT LOUD AND SAY IT PROUD! I LOVE TECHNICAL ANALYSIS! Good to hear that you have found ways to make a few bucks on  Viterra Inc. (VT TSX) , formerly Saskatchewan Wheat Pool, which when I look at the charts tells me you have been fleet of foot!

The three year chart tells the tale of a stock that has been in a downtrend since October of 2009 and its recent drop breached support on the lower rail of the down channel. There is also a death cross that formed in March of 2010 that called the end of support at $9.50 and then at $9.25.

The six month chart provides a closer view of the selling that has come into VT and the struggle to hold support at $8.50. Below that its down to $8.00 and after that $7.00.

I would suggest at this point that you might be best served taking a loss at this juncture and preserving capital so you can find a better opportunity. Right now you are looking at a loss of about 9% and that might still be within your tolerance in terms of where you cut your losses. Finding new lows your money always always hurts.

Be advised that  according to Brooke Thackray the period of seasonal strength for the agricultural sector runs from August to December.

MAKE IT A HUGE MAY AND HAPPY CAPITALISM!