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Molten gold. Montreal-based gold miner Semafo Inc. has declared its first dividend on rising output in its West Africa operations. (Petr Josek/Reuters/Petr Josek/Reuters)
Molten gold. Montreal-based gold miner Semafo Inc. has declared its first dividend on rising output in its West Africa operations. (Petr Josek/Reuters/Petr Josek/Reuters)

Schizas' Mailbag

Semafo’s long descent toward $3.00 Add to ...

Hello Lou,

I have been reading your articles for a while now.

I was wondering if you can make any comment on Semafo. It seems to be stuck in a rut.

Thanks,

Dan

Hey Dan,

Glad to hear that you are making use of my written work.

This will be the fifth time that I have examined the case for Semafo Inc. since May of 2009 when it was trading for $2.16 a share. At the time it was observed that the downtrend had been broken and that there appeared to be a good advance developing. The second occasion was on Nov. 10, 2010, on an assignment from Pierre who had been on the ride since $8.00. and was concerned about the health of the advance as the shares were trading at $12.45. It was advised to expect a pullback but that you didn’t want to shoot a running horse. The stock did as expected and ran to its all time high of $13.84 on December 03, 2010. After that it was all over but the crying.

More Related to this Story

The third run at the charts was on Dec. 7, 2011, when the shares were trading for $7.41. Greg wanted to know if a double bottom had formed signalling a reversal of the downtrend. What concerned me at the time was the formation of a bearish descending triangle which retrospectively was the right call. The stock could not hold onto support at $7.00 and continued to find new lows.

The last engagement was on March 12, 2012, when the shares were trading at $6.02. Brad had booked a profit on another stock I had analyzed for him and wanted a look under the hood to see if SMF presented a buying opportunity. It was outlined that there was an established downtrend and that the stock was struggling to hold support at $6.00. These conditions do not generally suggest a buy. What followed was more selling.

Another analysis of the charts will add to our understanding of the opportunities and risks associated with SMF.

The three-year chart tells the tale of a long and grinding decline after a wonderful advance. Of note on this chart is the strength of the downtrend, resistance along the 50- and 200-day moving averages, and a series of lower highs and lower lows. No oil painting here. The MACD and RSI did identify a number of trading opportunities that would be of interest to astute traders. It appears that the shares are on their way to retesting $3.00.

The six-month chart provides a close up of the double bottom that surfaced in late July and early August as the stock caught a bounce off $3.00 and ran to $4.50 before running out of gas in October. The MACD and RSI both signalled the momentum that gave rise to the lift.

SMF is not offering a low risk opportunity to make money given the persistence of the downtrend and lack of clarity as to direction. The trend is your friend until it ends and right now the trend is down.

Make it a profitable day and happy capitalism!

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

 
Security Price Change
SMF-T Semafo Inc. 4.76 -0.11
-2.259 %
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