I enjoy reading your column every week and your pertinent analysis. As other readers have pointed out, it's refreshing to hear someone recommend selling (or not buying) a stock for a change.
Can I ask you to have a look at Ainsworth Lumber? I've owned this stock for almost 3 years and it has had a nice run. I recently sold half at $3.25 and the other half at $3.75. The stock reached $4.30 but has recently pulled back to $3.80 or so.
I'm having second thoughts about selling and think I may have "shot a running horse" as you say. I'm considering buying again on a dip. $3.80 may be that dip. Can I get your thoughts on this ?
Thanks for the kind words and the assignment.
The last time I examined the case for Ainsworth Lumber Co. Ltd was on Aug. 17, 2009, when the shares were trading for $1.29. The company was restructuring its affairs as a result of the collapse of the U.S. housing market and had caught a bounce off of support at $1.00. It was advised to take a cautious approach on the stock given that the volume of shares traded was inconsistent which called the validity of the advance into question. It was also noted that there was resistance that came in at $1.40. Retrospectively it was the right call as the shares retreated to $0.87 by April 24, 2009.
Another run at the charts will provide greater insight in how best to proceed with this investment.
The three-year chart illustrates the advance off of a rock bottom of $0.46 in December of 2011 and the move to the 52-week high of $4.31 on March 20, 2013. A great trade for those who caught it. As of late the stock has pulled back as it hit resistance at $4.20 while the MACD and RSI both signalled that momentum was shifting towards sellers.
The six-month chart provides a close-up of the retreat from the highs and the sell signals generated by the RSI and MACD. Support at $3.80 is significant if ANS is going to mount a challenge to the 52-week high achieved in March. If that line of support is breached the stock may have to retest $3.50. The MACD currently indicates that selling pressure will continue while the RSI is turning higher, but only slightly.
It seems that you are concerned that you may have sold too early and that you have missed out on some profits. I would suggest that you should never regret booking a profit and taking the time to reconsider your options. With cash in the bank you can decide to get back on this ride, but do yourself a favor and wait until the selling pressure abates. The next release of U.S. Housing Starts is scheduled for Apr. 16, 2013. Make sure that the event is on your calendar. Housing starts drives demand for OSB.
Make it profitable day and happy capitalism!
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