Hello Lou,

Great website ….I really enjoy it.
Can you give us your take on Peregrine diamonds (PGD)?

Thanks

Dean
Kenora,On.

Hi Dean,

I last posted on Peregrine Diamonds Ltd.(PGD TSX) on October 21, 2009 for Betty and at the time I suggested that PGD had a tiger by the tail and that you had to expect volatility in the trading of the shares. Back in 2009 there was a move to the upside once the pennant formation was finished but it didn’t result in a sustained trend. The charts will illuminate how best to proceed from here.

The three year chart depicts the pull back to support at $1.50 in November of 2009 and then the  to a higher level of support at $1.75 in July of 2010. From there PGD enjoyed a nice run to its recent high.

The six month chart illustrates the the move to the high of $3.30 in late November of 2010. The MACD generated a buy signal in late July, a sell signal in mid September, a buy signal in late October, and a sell signal in late November.

PGD is currently testing support along the 50 day moving average and its trend line. The news stream was very active for the company starting in July of 2010  and into December as it announced the results of its drilling programs, private placements, and the status of their deal with BHP Billiton.

If the stock catches a bounce off support at $2.60 it will take lots of work to get it through resistance at $3.50. If you are interested in PGD you have to be prepared for the volatility. From where I sit this one still has a tiger by the tail.

Happy Capitalism!

Hi Lou,
I would appreciate your opinion on Shore Gold SGF-T
Not long ago it was showing nice progress in price at about $1.34 and now is seems to be frozen at this low price of about $1.01 or so. Do you know why? Thank you very much for your answer- Toni

Hi Toni,

Shore Gold Inc. ( SFG TSX) has been developing their diamond play at Fort a la Corne in Saskatchewan for some years now. Their most advanced project is the Star Diamond Project. Here’s the rub with any development situation. They have yet to build a producing mine and that means that they have to raise money continuously.

The Star Diamond Project has an estimated cost of $1.6B to get to production and the commissioning of the mine is not just around the corner. The allure is the opportunity to harvest 20M carats over a 12 year mine life.

The three year chart gives us a good view of the reversal of the downtrend that started in late 2008 and has carried SGF to its current levels.

The chart looks to be forming a cup and handle which is a continuation pattern.

The three month chart provides a better view of the handle being formed. The RSI and MACD both signaled a retreat from the highs. There is support at $1.00 which we want SGF to hold.

The rise to the 52 week high of $1.68 was driven by news released in late August of a positive pre-feasibility study and in September by another release that reported an increase in the resource estimate for the Star Diamond Project.

On September 23 SFG reported a private placement of shares and flow through shares to raise$27.5M. The common shares were offered at a price of $1.05 which took some of the upside out of the stock.

Shore Gold Inc. has a long road to travel and lots of money to raise to get to their goal of harvesting the diamonds that they have been hunting for the last 14 years.

For my money there is a trade on the cup and handle pattern but remember to take profits when they are available.

MAKE IT A BIG HALLOWEEN AND HAPPY CAPITALISM!

Lou,

Could you look at the activity of PGD. it had really good news last month but then fell back 50 %.

Do you like this stock ?

Betty

London, Ontario

Hi Betty,

Interesting case with Peregrine Diamonds Ltd. ( PGD TSX). It has had a huge run since July of 2008 and I think the question you are asking is do trees grow to the sky? No they don’t.

The driving force that has pushed the value of the stock has been the activity on their Chidliak property on Baffin Island. The company discovered kimberlites at Chidliak in 2008.

The name of the game from here on in is drilling the heck out of these targets at Chidliak and then seeing if the resource can sustain the funding of a mine. Peregrine is developing Chidliak with BHP Billiton which will earn a 51% stake in the project for spending $22.3M developing the opportunity to a bankable feasibility study.

PGD has interests in other properties but at this point I would say that Chidliak is in the center ring.

The three year chart indicates the trend reversal from a sell off that started in July of 2008 with the discovery of the first kimberlite at Chidliak. The new support level at $0.50 was established when BHP backed into the property in November of 2008.

The big spike to the $4.65 high was driven by some of the results of the 2009 exploration program funded by BHP such as the discovery of new kimberlites bringing the total to 16.

The three month chart provides a better view of the the most recent action on the stock. The move started on September 14 with the news release announcing that seven new kimberlites had been discovered. On September 21 news that large diamonds had been recovered just added fuel to the fire.

In addition the company was featured in a report by John Kaiser in the August 6th edition of his Bottom Fish Action report which was cited in the Northern Miner. If you want to get people interested in a mining play these would be two places to circulate the story.

The RSI on the three month chart shows that the stock got overbought as the excitement over the news made the rounds. When a stock gets overbought you tend to see a pull back from the frenzy as investors refuse to meet the accelerating price.

The chart is also another good example of a pennant formation with a big stick and a flag at the end. Typically you will see a return to the upside once the pattern is complete.

A junior mining stock with a senior partner funding additional work on its main area of interest, other properties in various stages of development, exposure through highly regarded sources, and a pennant formation. Yes Betty I like the stock but please keep in mind that it is a junior exploration company with a tiger by the tail and that you have to expect volatility on the trading action.

MAKE IT A BIG HALLOWEEN AND HAPPY CAPITALISM!