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A Teck Resources mine in Chile
A Teck Resources mine in Chile

Schizas’ Mailbag

Teck Resources Ltd. suffering from weak global growth Add to ...

Hello Lou,

I value you opinions very much. If possible could you comment on TCK.B?

Thank you,

Ed

Hey Ed,

This will be the fourth time that I analyze the opportunities and risks associated with Teck Resources Ltd. (TCK.B-T). The last post was on September 21, 2011 when the shares were trading for $36.11. Doug wanted to know the prospects for the company over a twelve month period.

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It was observed that the MACD indicated continued weakness and that it would be prudent to wait before being a buyer. It was also noted that if the shares didn’t hold onto support at $35.00 it would retest $30.00. Retrospectively that was exactly what happened.

A review of the charts will provide further particulars as to the best course of action going forward.

The three-year chart offers a number of patterns worth citing. The downtrend that started in January of 2011 offers a good example of a double top. A double top is a reversal pattern that informed the astute investor that the advance that started in 2010 was coming to an end.

Over the last eighteen months all efforts to move higher have been met with resistance along the 200-day moving average. Currently the stock has been testing support along $30.00 and meeting resistance along the 50-day moving average.

The six-month chart depicts the support at $30.00 and the resistance that has surfaced at $34.00. The MACD and RSI are both bending down, suggesting another retest of $30.00.

With a stubborn downtrend in place and an established death cross it’s hard to recommend a buy. In addition, the momentum indicators are not suggesting a breakout.

TCK.B needs a robust global economy to drive demand for the materials that they extract from their operations. The International Monetary Fund has announced that they will be lowering their forecast for global growth in the near future. My interpretation is that if this stock is going to start an advance it will not be assisted by a growth in demand. A strong micro cannot overcome a weak macro.

Make it a profitable day and happy capitalism!

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

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