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Sherritt Chairman Ian Delaney addresses shareholders during their annual general meeting in Toronto, May 24, 2007. (J.P. MOCZULSKI/J.P. MOCZULSKI/REUTERS)
Sherritt Chairman Ian Delaney addresses shareholders during their annual general meeting in Toronto, May 24, 2007. (J.P. MOCZULSKI/J.P. MOCZULSKI/REUTERS)

Schizas' Mailbag

Keep your powder dry with Sherritt International Add to ...

Hi Lou,

I don’t recall you doing an analysis of what must be one of Canada’s most interesting companies – Sherritt.

The company always seems to have so many moving and controversial issues (CEO stepping down, operations in Cuba, an operation in Madagascar that looks promising but for now is a big money pit, etc.) and never seems to get above water.

What do you think? Is it worth hanging on?

Bob

Hi Bob,

Sherritt International Corp. has, as you have mentioned, been facing some issues that they are working their way through. But despite the good effort the stock has broken the uptrend line that saw it bounce off the October, 2011 lows. A review of the charts will provide additional information to help you decide whether to sell or hold.

The three-year chart features a number of items worth noting. The first element that draws the eye is the resistance at $6.50 that the stock was just not able to break above in 2012. In addition the MACD and RSI both generated sell signals in January that finally resulted in a steep sell off in late February. Neither the MACD nor the RSI is indicating that a reversal of the downtrend is imminent.

The six-month chart provides a sharper focus on the trend for the stock. There is support at $5.25 where the shares could catch a bounce but overall there are so many moving parts that a clear picture of direction has yet to emerge. This stock has been generous to investors who were patient and waited for the right moment to act. The move from the October 2011 low of $4.00 to the February, 2012 high of $6.50 produced a 62.5 per cent return in fewer than 150 days.

Investors thinking of buying this stock should put it on your watch list and wait for some indication that the last of the sellers have moved on and a new uptrend has developed. For existing shareholders it is a matter of capital preservation. Given that the trend is down with no indication of a reversal I would say it is a sell with the intention of getting back in on a pull back.

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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