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First Quantum looking like a hold Add to ...


I bought FM at $65. What is your opinion, hold or sell?

Thank you,


Hey Daniel,

Congratulations on your call and robust profit! The last time I ran an analysis on First Quantum Minerals Ltd. was on April 16, 2010 for Smita. At the time the stock was trading at $78.73 and it was noted that the advance had stalled. FM was testing support on the 200-day moving average and there was resistance at $82.50. In addition there were no indications from the MACD or the RSI that momentum was shifting towards an advance.

Let's examine the charts to see how things worked out over the last 14 months and if you should hold or sell.

The three-year chart indicates that as we got into May of 2010 the shares breached support along the 200-day moving average. By June of 2010 it caught a bounce off support at $50.00 and reversed the downtrend. What is also evident on the chart is that FM is meeting resistance in the $145 range. An ascending triangle has also formed, which is a continuation pattern that needs our attention.

The six-month chart depicts the range-bound pattern that has developed. There is support at $115.00 and resistance at $145.00. The shares have oscillated within the range four times generating nice opportunities for traders.

You asked if you should hold or sell. Before making that decision you should be aware that the board has approved a 5-for-1 stock split. In most cases a split is intended to get the shares into more hands and increase trading volume. The time frame expected for the split is Aug. 11, 2011. In addition the company is scheduled to report second-quarter results on Aug. 8.

Given the ascending triangle, the pending stock split, and the fact that FM is the second largest publicly traded copper producer, I think it's a hold.

If you want to play defense you could consider getting your adjusted cost basis down to zero. You could sell half of your position to recoup your original investment and leave the rest in the market.

Make it a profitable day and happy capitalism!

You can now track a stock's return over various time periods using Globe Investor's Watchlist. Go to your Watchlist and choose the new Per Cent Performance view. Read more: Watchlist: Better ways to measure portfolio performance

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

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