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Alamos Gold drops takeover bid for Aurizon (iStockphoto)
Alamos Gold drops takeover bid for Aurizon (iStockphoto)

Schizas' Mailbag

Alamos Gold is no buy and hold stock Add to ...

Hi Lou,

Can you please re-visit Alamo Gold. It is difficult to pick a winner. Is it good idea to buy ETF of the juniors and/or seniors?

Your opinion is greatly appreciated.

Thank you.

Vince

Hey Vince,

Thanks for the assignment. And yes picking winners requires a lot of work but it can be done.

This will be the third time since 2009 that I explore the particulars associated with Alamos Gold Inc. The most recent analysis was conducted on June 28, 2013, on a request from Joyce. The shares were trading for $11.71 and she was was on a bottom fishing trip. The patterns that I examined indicated that the shares had been operating under a downtrend that started in November of 2012 and the death cross that formed in January of 2013. There wasn’t a lot of evidence that a trend reversal was eminent and it was advised to confirm the bottom and keep her powder dry until there was greater visibility as to direction.

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By early July of 2013 the MACD and the RSI signalled a buy and the stock started to move higher. It had a nice run to a 52-week high of $17.86 by September but that was as good as it got. The shares then began another retreat and are now trading below $9.50.

Another run at the charts will help identify signs that could help you with this investment.

The three-year chart reveals why investors should always book profits when they are available. AGI enjoyed a brief three month period where it generated gains for investors. After that the shares continued to sell off. In addition a death cross formed in December of 2013 and the shares have been meeting resistance along the 50-day moving average.

The six-month chart depicts the base that has been forming at $9.00 since February of 2014. Also worth noting is the sell signal generated by the MACD and the RSI in mid January as the stock met resistance along the 50-day moving average. The momentum indicators did produce a buy signal in February as the shares bounced off $9.00 and ran to $11.00 by mid March.

The best way to approach AGI is to trade it for profit. Watch the charts for buy and sell signals that will help you capture opportunities and reduce risk. This is not a buy and hold investment.

You asked about investing in Exchange Traded Funds and on a fundamental basis it makes sense. You get diversification that you can’t achieve with a single stock. What is important with an ETF is getting on the right ride. There are times to be in juniors, there are times to be in seniors, there are times to be in cash. You must pick the right sector at the right time.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

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