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Grocery store owner Gilles Robin works on his fruits vegetable display on Nov. 28 2006 in the Breakeyville, Que. (JACQUES BOISSINOT/JACQUES BOISSINOT/THE CANADIAN PRESS)
Grocery store owner Gilles Robin works on his fruits vegetable display on Nov. 28 2006 in the Breakeyville, Que. (JACQUES BOISSINOT/JACQUES BOISSINOT/THE CANADIAN PRESS)

Schizas' Mailbag

Colabor Group Inc. has a flex point on the calendar Add to ...

Hello Lou:



What's your opinion on the Colabor Group? They're now trying to make inroads into the Ontario market from their home base of Quebec.It's a small company dealing in food merchandising and distribution.



Fairly solid. Carrying some heavy debt from new acquisitions.



Thanks, Paul from Windsor













Hi Paul,

More related to this story

Colabora Group Inc. fell into a steep decline after they reported their Q1 results citing increased competition in the grocery distribution industry in the markets that they serve. The stock has retraced some of its losses but still has a lot of ground to cover.



What we have to recognize is that GCL is a micro cap company that has expanded rapidly through a series of acquisitions. While there is nothing wrong with buying up companies that fit into your business plan it is absolutely required that you don't lose existing customers in the process.



Lets consult the charts for some guidance regarding this opportunity.



The three year chart traces the sell off that has taken the shares of GCL from the highs approaching $13.00 in May of 2011 to below $8.50 in June. Over the last seven trading days the stock has recovered as investors with a high risk tolerance took advantage of a severely oversold situation.



The six month chart provides a closer look at the recent trading. The MACD and RSI generated a sell signals in late April of 2011 ahead of the retreat that coincided with the release of the company's Q1 results.

Bravo to those investors who were booking profits in advance of the flex point. The next scheduled report is for Q2 2011 which the street is expecting on July 7, 2011. Make sure its on your calendar if you own or are thinking of buying GCL.



What is apparent on this chart is that there is resistance at $10.50 and that there is a death cross that has formed. Another thing to consider is that the volume has been somewhat thin as the shares bounced off $8.00 on June 16. At this point in time I would not be chasing the yield in the face of these signals. Its a times like these that it pays to be patient and watch the signal generators for indications that you are not going to find new lows with your capital.



Make it a profitable day and happy capitalism!



Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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