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Message: From SWEDEN .. Lucara Diamond Corp. report.
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Thursday 28th November 2013
To catch a falling knife or not?
I have been involved in Lucara Diamond Corp. from 6 kr, it is one of my favorite companies. It is a Lundin Companies that go extremely well right now fundamentally with a flow of diamonds and big profits. All debts were paid just now and the future looks bright, the company are looking for acquisitions, when you only have a kimberlitpipe / diamond mine into production, Karowe in Botswana. Management has high demands on a potential acquisition which is a good sign of quality when one of the worst companies with large cash can do is make bad acquisitions, or 'diworsification' as one of history's most successful investor Peter Lynch puts it in the readable and fun book "One Up on Wall Street '.
Besides a possible course trigger in a good acquisition , I see also the Annual Report on February 24 as a good trigger when the year's successes + fourth quarter totaled. The company is trading currently at a P / E about 10 and about 6.5 for the full-year results. ( http://www.bloomberg.com/quote/LUC:CN ) in resource companies can gain course be less predictable, but it's a pretty low valuation for a company that makes so much profit and is now debt free. It feels as if the valuation has not really caught up with Lucaras rapid earnings growth over the past year. Lucara got some varying price targets, from about 14.50 to 8.20. The lower teaches adjusted up as the resource update and full year results are reported in the first quarter of next year.
The fundamental is thus cannon , it is a very good company. What, then, with the technical analysis that determines when we should buy, it's a good time to buy today? The medium term trend as seen in the first candlestick chart below from HP which is set to date for each course staple is upward and good. The course also broke up the trend channel ceiling in the middle of October. We thus have a longer good trend and all moving averages MA 20, 50, 100 and 200 in the right order, which is a good sign. The course, however, just went through MA 20 a little bit, which is a minor sell signal, more on this in the next paragraph.
In the short term, the candlestick chart below that is set in 60 minutes, we see that the course Rebounds in a clear linear downward trend since 25 November and after the recently very powerful (and legitimate) upturn. This brief downward trend is intact and you will enter now a risk that in the short term catch a falling knife before this trend is broken and has turned into a positive trend which will give a buy signal. At this writing, the sales side bigger and Lucara open shortly on the Toronto Stock Exchange, the rate in Canada driving course often trend on First North in Sweden and also vice versa.
It is difficult to predict when the trend break comes and when köpsignalen arises but I'm guessing it will take a few more days. If nedtrenden continues as its exchange rate oversold levels within a couple of days in terms of RSI chart in the top daily chart which should pave the way for a new upswing.
Avanza Forum writes people that it's cheap now and just to act on it, yes you can do it but there is a risk, as I said to catch a falling knife in the short term and it may be even cheaper. The trend is your friend! In the longer term in six months / years, I am convinced, however, continued price appreciation of the fundamental reasons I wrote about in the beginning of the post.
Posted by Trend Hunting
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