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Stock market (Luis Santos/Getty Images/iStockphoto)
Stock market (Luis Santos/Getty Images/iStockphoto)

Schizas’ Mailbag

Why Imperial Metals is not a buy-and-hold stock Add to ...

Hi Lou: What do you think of Imperial Metals over the next two years. Thanks, Al

Thanks for the assignment. Right off the bat I won’t be able to provide visibility on what might happen to Imperial Metals Corp. or any other stock over a two-year period. I base my evaluation on trend, support and resistance, while advocating constant surveillance. Investors cannot afford to buy a stock and never look at their statements. A daily review of the charts to ensure that the reasons you bought the shares are still valid is not an option; it is a requirement.

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An investigation of the charts will help put the current situation in focus and from there you can decide how best to proceed.

The three-year chart depicts the volatility that has been the major theme for Imperial. There have been fast and sharp advances followed by steep retreats. What is clear from this chart is that buy and hold has been a wash while trading for profit has demanded a high level of disciple and execution. When the shares failed to hold support at $16 in April, 2012, it set up a rapid decline to just over $8 by August, 2012. The MACD and the RSI both signalled a buy from the August lows setting up an advance to $15 by January, 2013. The breach of support at $14 in April, 2013, ignited another decline to current levels.

The six-month chart provides a closeup of the sell signal generated by the MACD and the RSI in April and the subsequent break below support at $14. Also worth mentioning is the resistance along the 200-day moving average in late April and is the death cross that surfaced in May. Currently the stock has met resistance at $11.50 and has a ledge of support at $10.50. Finally the MACD and RSI are indicating a retest of support at $10.50.

The research conducted on your behalf suggests that Imperial is not a great stock for a buy and hold investor and demands discipline and skill from traders. What Imperial needs is a sustained increase in the price of the base and precious metals it produces in order to provide investors with a sustainable uptrend.

Make it a profitable day and happy capitalism!

 
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