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Yamana Gold's Jacobina Mine in northern Brazil. Yamana has announced the second increase this year to its dividend. Yamana Gold (YAMANA GOLD)
Yamana Gold's Jacobina Mine in northern Brazil. Yamana has announced the second increase this year to its dividend. Yamana Gold (YAMANA GOLD)

Schizas’ Mailbag

Missed forecasts hammer Yamana Gold shares Add to ...

Hey Lou,

What’s happening with Yamana Gold?

Yves

Hey Yves,

This will be the fifth time that I examine the case for Yamana Gold Inc.

The last time was on Feb. 27, 2013, when the shares were trading for $15.82. Judi was interested in knowing what I had to say about the company as she was encouraged by recent earnings reports and production guidance. The research conducted on Judi’s behalf indicated that YRI needed to start beating expectations. The company had missed street forecasts in three of the four quarters reported and met them once, according to Zack's Investment Research. Generally that sort of track record will not get a stock moving higher.

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It was also identified that the stock offered trading opportunities but was not a candidate for a buy and hold strategy. In addition the stock was trading in a down channel and was meeting resistance along the downtrend line. On April 30, 2013, YRI once again reported earnings that missed the street. Management cited lower gold prices and higher costs which conspired to reduce the impact of higher production. The company is currently undertaking cost-cutting measures to address the prevailing market condition.

An examination of the charts will provide further insights as to the trend, support, and resistance that should be weighed when considering an action plan for this investment.

The three-year chart is another example of a stock in the grips of a value destroying decline. The patterns identified in February in response to Judi’s email have remained in play. The downtrend has continued unabated as has the resistance along the trend line. Every attempt to move higher has been met with a fresh wave of selling, sending the stock lower. YRI hit a 52-week low of $10.70 on May 17, 2013, where it caught a bounce.

The MACD on the six-month chart has offered great buy and sell signals even as YRI has retreated. Currently the MACD is indicating that the resistance along the 50-day moving average will lead to more selling which could set up a retest of support at $11.00.

YRI has been suffering with all the gold miners as the price of the commodity has continued its retreat which has destroyed value throughout the food chain.

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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