Wi-LAN is no investment for a senior

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Hello Lou,

I am in my middle 70s and I think foolishly bought WIN at its highest price of $6. It is something now I am concerned may drop considerably, giving me a large loss. Do you think I should hang on, or take my loss? I would appreciate your opinion. I now feel I just gambled. Lesson learned.

Thank you so much,

Jean

Hey Jean,

Thanks for the assignment.

This will be the third time that I examine the case for Wi-LAN Inc. The first analysis was conducted on April 28, 2010. Tom wanted to know if it was a buy at $3.03. The research conducted on his behalf indicated that the stock was range bound and that he should trade in the range until the stock broke through resistance and established a new advance. By September of 2010 WIN broke out and ran to $9.50 by August of 2011. But that was the end of the good times.

The second study was undertaken on March 5, 2012. The shares were trading for $5.16 and Andrew wanted to know if the stock was a buy, a sell, or a hold. The charts signalled that there was an established downtrend with a death cross clearly visible. It was advised that the best course of action would be to sell. Retrospectively that was the right call.

At your request I will investigate the evidence on the charts and provide you with additional information to assist you with your investment.

The three-year chart highlights a number of factors that need your attention. The break below support at $4.50 in March of 2013 indicates that WIN may have to retest support at $3.50. There is a long-term downtrend in place and a death cross that resurfaced in December of 2012. In addition the RSI and the MACD both signalled the selling pressure that started in March.

The six-month chart provides a close up of the resistance along the 50- and the 200-day moving average that has stalled every attempt to establish a new uptrend. The sell signals generated by the MACD and RSI are also very evident on this chart. Currently the momentum indicators are signalling that the shares are oversold which could attract buyers but given the other patterns in place I would say we need more information to say that the selling has abated and that buyers are in control of the market.

WIN is scheduled to report its first-quarter 2013 results at the end of this month. Make sure to put that date on your calendar. I am not sure what motivated you to buy this stock. It might have been the dividend. However you may want to examine your motives and see if it fits your investor profile. I get the sense that you are risk averse and perhaps need to look for higher quality stocks. WIN is a small cap stock and the smaller the cap, the higher the risk.

Also keep in mind that the company is in the business of exploiting its patent portfolio. The stock moves higher when it beats an infringement settlement out of a company with deep pockets. There is an old saying on the street that suggests avoiding investments in litigation. Finally I believe that someone in your age group should be investing for income and security.

Make it a profitable day and happy capitalism!

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