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Kinross Gold operations in Kupol, Russia (James Hill/James Hill)
Kinross Gold operations in Kupol, Russia (James Hill/James Hill)

Schizas' Mailbag

Kinross: Approach with caution Add to ...

Why is Kinross lagging behind amidst record prices for gold. Some analysts still rate it as a buy. Your opinion would be appreciated.



Thanks,



Allan.

Hi Allan,



I have covered Kinross Gold Corp. (K TSX) twice in the last year. The first time was on July 12 and the second on February 12. In the February post, it was noted that there was a flex point scheduled for February 16, 2011 when the company was scheduled to report its Q4 results. When the company missed the street forecast, it set up a breach of support at $16.00 and the retesting of support just below $14.50. The next quarterly report for Q1 is scheduled for May 3. Please make note of the date if you own K or are thinking of buying it.



Kinross has been pushing its future prospects. By 2015, it expects to double its production.To that end, it has been actively acquiring companies and opportunities. Last year it bought Red Back for over $7-billion. Since March, the company announced a $1-billion investment in Ecuador and the purchase of the 25 per cent of the Kupol mine in Russia that it didn't already own. All well and good, but until they get to the promised land, investors will continue to ask, " What have you done for me lately?"

Let's consult the charts for some insight as to what may be in store for K.





The three-year chart clearly depicts the established downtrend since November of 2009 when the stock was trading at just over $24.00. What is also evident on the chart is a double top in the same time period. A double top is a reversal pattern that signalled that it was time to get out of Dodge and preserve capital.



The six-month chart tells the tale of a stock in a rapid decline. The MACD signalled a shift in momentum to selling in December of 2010 that saw the stock fall from $19.00 to just below $14.50 in March. That's a retreat of over 23 per cent in less than 90 days. What is also illustrated is the resistance that K has been meeting along its 50-day moving average.



Currently the stock is trying to hold support in the $14.50 range, with no clear signal of a shift in momentum. The MACD IS still trending lower as is the RSI. At this point, without a strong shift in momentum to the upside, it would be best to approach this one with caution. Eventually, all its efforts will result in a boost in production and better-than-expected financial results, but that day is still in next-year country.





Happy Capitalism!

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