Hi Lou,

A friend of mine recommended ORT.A to me a couple of weeks ago, problem is that there isn’t much info in English and no coverage. The share price is up over 400% already this year and 3,000% in the last year ! Should I continue to add to my position and take profits along the way ?

Thanks,

 Mario

Hi Mario,

Orbite V.S.P.A. ( ORT.A TSXV)  has had a brilliant run on the development of both its alumina clay deposit and its patented extraction technology. Alumina is the base from which aluminum is made and if the company’s patented technology can move from the  pilot plant stage  to commercial operations they could have a tiger by the tail. Currently Canadian aluminum producers import $2-3 billion in alumina every year. If ORT.A can displace the imports of alumina with a domestic supply from their Quebec deposits which could also yield rare earth metals and semiconductor materials then the stock has more upside.

But lets not forget that the operative word in the last sentence is “  If ” and a its big one at that. Taking a process to commercial stage is not without risk. Often times the move up the volume scale to create an economically viable process is not possible. That’s not to say that it can’t be done but that there are still lots of questions that need to be answered.

The charts will give us a better idea of what has been and what may yet come.

The three year chart clearly illustrates the extreme liftoff that the stock has enjoyed since August of 2010 when they reported that they had been granted a patent allowance in Canada. The announcement coming just ten days after a $705,000 financing at $0.15 a share plus attached warrants indicates to guys in the know that management knows what it is doing.

The next round of financing that raised $12 million was priced at $0.45 a share plus attached warrants. The warrants were in the money at $0.75 so I would assume that most if not all have been exercised by this point.

The six month chart depicts the steady advance that ORT.A has enjoyed since November of 2010. What concerns me is that the MACD looks to be turning down indicating that for the moment at least that we can expect selling to come into the picture. It doesn’t mean that the stock is about to breakdown but simply that for the moment all the good news has been baked into this cake.

If you are thinking of getting on this ride it might be prudent to pick it up on a pullback. If you have been in it since last year it would be worth thinking about booking some profits and looking to buy back in after it settles down. Clearly the stock has had a good run but trees don’t grow to the sky. In addition the company’s website has all its information in English so you may want to go there to conduct your due diligence.

Happy Capitalism!

Lou

I have been following NEO  for about three years and averaging my way up. Any thought for the next year?

Thanks

Steve

Waterloo, Ontario

Hi Steve,

I last posted on Neo Material Technologies Inc. (NEM TSX) on October 14, 2009 for Lalit. At that time the stock was trading at $3.91 and in less than a year and a half the stock has more than doubled. Love when that happens. The charts will provide a better view of the prospects for the stock.

The three year chart illustrates the advance that began in July of 2010 as NEM moved off support at $3.50 to the close on February the 8, 2011 at $8.60.  Nice when that happens. The one concern that I have with the chart is that there is a fairly wide gap between the price of the stock and the 200 day moving average suggesting that in the short term NEM has moved a bit fast. The recent  concerns about global supplies of Rare Earth Metals and China warning it might cut back exports has lit the fire under this kettle.

The six month chart depicts the advance that began in July of 2010 and has steadily continued. The uptrend line has not been broken and there is a golden cross that formed in late September.

At this point I don’t see any major signals that suggest that NEM could reverse the trend. However that doesn’t mean that you should put your stock certificates in a drawer and forget about them.

The MACD and RSI both seem to be in the process of  signaling  a pullback. At this point I don’t think it breaks below the trend line but rather tests it as it has over the last 6 months. Having said that lets remember that you need to monitor your holdings daily. From that surveillance you can make better and more timely decisions.

Happy Capitalism!

Dear Lou:

Could you please give me your opinion on Arctic Glacier Income Fund.

Thanks:
Paul

Hi Paul,

Before I get to Arctic Glacier Income Fund I wanted to update a couple of earlier posts.

Amerigo Resources – ARG TSX – looks like the cup and handle played out – stock moved nicely to the upside and today Codelco announced an $11b program to boost mine output.

Avalon Rare Metals – AVL TSX – Carol, who is one of our readers, gave me the heads up that the Dines Letter has been touting this stock – so that helps explain some of the upside.

Okay lets look at the party ice company.

What can you say about an income trust that discontinued distributions a year ago? Tough times no doubt and given the seasonal nature of the business with sales strength in the May to August period I think you would have to be cautious at the best of times. The Q2 report that covered the period ending June 30, saw the top line weaker year on year.

The three year chart shows resistance at the $2.1o . The units have to get through this level convincingly to move higher. I would also like to see better volume.

The MACD on the three month chart indicates that the upside momentum seems to be stalling.

Another factor in play is the amount of cash being spent to defend an antitrust suit in the United States. Nothing says uncertainty like litigation and investigation.

I dont think Q3 which will include the months of July and August will see a turn in revenue given that the weather patterns in AG’s prime markets may not have had campers and cottagers filling their coolers as often.

No distribution, an investigation, falling revenue, MACD turning down, resistance at $2.10, and low volume.

Not quite my bag of ice.

Happy Capitalism!

Lou,

What is your opinion on the prediction that REE (rare earth elements) is the next big story given the world drive to hybrid cars? How do you feel about Avalon Rare Metals in this context?

Thanks
Henry

Hi Henry,

Great question! What is the future of hybrid and plug in hybrid vehicles? Current forecasts suggest we could see global hybrid vehicle sales growing at an annual compounded rate of 12% through 2015. Toyota reported in 2008 that their global production of the Prius had crossed the 1 million vehicle mark.

U.S. sales of hybrid vehicles are expected to cross 1 million units in 2012. This is all good news and as we say in technical analysis the trend is your friend till it ends. But lets keep in mind that hybrid sales are still a small subset ot total vehicle sales. In most markets you need to convert 30% of sales to a new platform to confirm the opportunity is real.

With that in mind, I think what we have with Avalon Rare Metals ( AVL TSX) is a speculation on the outcome of these developments and the advancement of their deposits. AVL is working to develop deposits of rare earth elements in Canada and if successful will be one of the few sources of these elements outside of China.

The three year chart shows a stock that has taken off like a a Saturn VI rocket since the beginning of the year. When looking at the news released by the company it is clear that that they have had some encouraging drilling results and made progress in defining the process that they are considering to harvest the rare earth elements from their deposits.

The bull boards are full of very enthusiastic posting about the company which shouldn’t come as any surprise. With these kinds of returns I am sure that most investors who have enjoyed the ride start every single day playing ” I Just Want To Celebrate” by the 1970′s Motown band Rare Earth!

The question is how much gas is left in the tank of this rocket?

The three month chart shows that the stock has more then doubled since August 17. There was a golden cross at the beginning of June when the stock was trading at $1.25. The move to yesterday’s close was a good gap up on news that Former National Chief Phil Fontaine was added to the board of directors. Fontaine’s role will be to assist the company in its relations with first nations communities.

I love a great story and a stock moving up aggressively, but lets make sure that profits are booked when available. If you have a four or eight bagger on this stock make sure to get your adjusted cost basis to zero and watch that the uptrend continues. Trees don’t grow to the sky.

Happy Capitalism!