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(Getty Images/iStockphoto)
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Schizas’ Mailbag

Charts for Nevada Copper full of positive signals Add to ...

Hello Lou,

Wondering what your thoughts are on the outlook for Nevada Copper Corp. I bought in mid-January, when it appeared as a heavy volume gainer on stockcharts.com. Saw the trend reversal and the volume to back it up.

Thank you for your time,

Amit

Hey Amit,

Thanks for the assignment.

Nevada Copper Corp. owns 100 per cent of the Pumpkin Hill copper, silver and gold project in Nevada. Development of the resource has an underground component that has been permitted and is expected to reach production in early 2016. The first phase of the open pit operations is expected to complete permitting in 2014 and is forecast to begin production in 2016 as well. Your purchase of the shares was well timed given the move up that started early this year.

An audit of the charts will help identify the signals and patterns that will assist your decision making.

The three-year chart outlines a stock that has been in a retreat that started back in 2011 as copper prices began their decline. NCU traded to a high of $6.13 in May of 2011 while Pumpkin Hill has been advanced greatly since then. There are two external factors that could help drive the price back to those levels: a rise in copper prices or a takeover offer. There has been some speculation that a bigger player could be interested in the stock given the value of the resource, and its favourable location.

What is observable on the chart is the double bottom that formed between late December of 2013 and early January of 2014 which signalled a reversal of the downtrend. In early December of 2013 the MACD and the RSI also indicated that the stock was oversold and that investors were starting to build positions. Your surveillance of the volume increase in January of 2014 contributed to a healthy return. Well done! The leg up that started in March of 2014 was in response to an increase in the price of copper. As copper goes so goes NCU. Finally there is a golden cross that formed in early May suggesting that we can expect more buying.

The six-month chart has a number of patterns you should pay attention to. The first is the base of support forming near $2.10 as the stock consolidates. The MACD and the RSI both signalled a sell as the stock got overbought by the end of April. The move above the 50- and 200-day moving averages and the golden cross provide additional evidence to hold your position for further gains.

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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