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schizas’ mailbag

Detour Gold’s storage dome at Detour Lake, in northeastern Ontario.

Hi Lou,

I'm sitting on profits on my investment in Detour Gold. Is there more in it?



Hey Nate,

Thanks for the assignment.

This will be the second time that I investigate the opportunities and risks associated with Detour Gold Corp. The first time was on May 29, 2013, when the shares were trading for $9.82. Dan sold on the announcement of a financing priced at $8.75 and was surprised that the stock went up. The analysis conducted on his behalf indicated that investors were excited by the prospects that the company would begin production in the third quarter. The examination of the charts told the story of a stock that was suffering from a long decline induced by weakness in the price of gold. It was advised that I liked the story but the charts were not supporting a buy at that time. Dan was encouraged to put DGC on his watch list for a possible reversal in the downtrend.

Another run at the charts will help identify if the stock has more to give.

The three-year chart illustrates the continued selling that took the stock to a 52-week low of $2.88 in late November before the downtrend reversed. The next challenge for investors is the resistance at $12.50. If the price moves through resistance with conviction it can run to $15.00 and beyond that to $17.00.

The MACD and the RSI on the six-month chart both signalled a buy in late November when the shares were oversold. A golden cross is on the verge of forming, indicating that the advance has more in it. At this point in time there are no indications that the uptrend is about to reverse. Keep in mind that the stock is moving with the price of gold which has gotten quite a lift from the geopolitical sabre rattling in Crimea. I don't expect peace and brotherhood to breakout just yet.

Based on the evidence at hand I think you can expect to add to your gains.

Make it a profitable day and happy capitalism!

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