Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Production at Hudbay flagship mine, the 777 in Flin Flon, Man. (Brian Pieters)
Production at Hudbay flagship mine, the 777 in Flin Flon, Man. (Brian Pieters)

Schizas' Mailbag

HudBay Minerals Inc. struggling with resistance Add to ...

Hi Lou,

I read your comments every week. They are very good.

Can you give us your take of HBM?

Thanks,

Vincent

Hey Vincent,

The last time I ran the charts for HudBay Minerals Inc. was May 12, 2010 on an assignment from Norm. What he wanted to know was if the stock was a good candidate for a short. I agreed with him that the shares had the potential to move lower but to be cautious.

More related to this story

The shares were trading at $11.41 and did pull back to $10.00 by the end of May 2010 but that was the end of the downtrend. From there it began a spectacular uptrend that pushed the value to $19.00 by the end of 2010. That however, was the top and so began a reversal that set up a big short all the way down to $9.00 by late 2011. The round trip, long and short, created a lot of wealth for investors who interpreted the signals correctly.

Another review of the charts will provide greater substance to your decision-making.

The three -year chart indicates that the downtrend that started in December of 2010 broke as we came into 2012. Over the first three months of this year HBD enjoyed a run to the upside that hit resistance at $12.25. From the October 2011 low of $9.14 that is a healthy 34.02 per cent gain. There has been a pullback that is testing support at $11.00 and that is where we should focus some attention.



The six-month chart depicts a double bottom that has surfaced at $11.00, which suggests it could be setting up a reversal of the selling that started in late February. However there also appears to be a descending triangle forming and there are no signals emanating from the RSI or the MACD to support a buy. At this point I would say that we need more evidence that the stock is ready to move higher.

The company is expected to report first-quarter 2012 results on May 4, which will provide a milestone we can track progress against. Best-case scenario HBM catches a bounce off $11.00 and moves through resistance along the 200-day moving average with conviction. But we don’t always get the best case.

Make it a profitable day and happy capitalism!

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

Visit his website

 
Security Price Change
HBM-T HudBay Minerals 11.02 0.26
2.416 %
Add to watchlist
Live Discussion of false on StockTwits
More Discussion on false

Topics:

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories