SFF, Seafield Resources update.

Hamilton

 sff sept 7 2013sff sept 7 2013 s

Fully diluted there are approximately 250 mln. shares outstanding for this company. At the most recent stock price of 3 cents, that makes the total capitalization that the market puts on this stock  $7.5 mln. Relative to the amount of money that has been drilled away, roughly >$30 mln. , there is very little to show for all that geological activity. In the meantime the $16 mln. credit facility, not updated on the website, should by now have dwindled to a mere $6 mln. or so; pocket change for this kind of an operation that, should it want to move to a production phase, will require well in excess of $100 mln. just to get started. We would put the chances of a pleasant outcome near zero.

But the stock has done a clean a-b-c X a-b-c, double zig-zag, give or take a cent. On May 24, the company announced a re-pricing of existing employee options and the granting of an additional batch to a recently hired employee. This was approved at the board meeting on June 25th. Most options now have a strike price of 10 cents. There are about 15 mln. employee options in total (and a lot more for the credit facility!). Presently, if you are optimistic, if only briefly, you could buy the stock at 3 or, maybe, 2 cents and view it as an immediately vested, non expiring option with a premium of 3 or 2 cents. In fact you would be getting a much superior deal than the Seafield employees themselves despite the premium paid. This is evident if, for the sake of argument, the stock miraculously  rebounds to, say, 16 cents. You would gain 14 cents and the employee just 6. If the stock does not rebound you lose 2 cents and the employee his job. Which begs the question why the employees are not on the bid all the time at these levels.

YUM update

Hamilton

YUM sept 6 2013

A fortnight or so ago we suggested that this stock was a sell. The wedge appears to be completed at about $75. As each subdivision in this wedge like structure must itself subdivide in a three wave affair, you cannot ever be absolutely certain that you are at the end of the ride. Even so you should always assume that you are simple because the upside potential is considerable smaller than the downside. An active trader might consider buying back his short and taking the 8% gain, all other mortals should stay with the original trade as either way $59 is on the horizon.

ABX update

Hamilton

ABX sept 6 2013

SFF.VjcABX could go anywhere from here, we suspect it will be down but , frankly, we couldn’t care less. The idea that one has to ALWAYS be invested fully, on the grounds that you might miss more up than down opportunities, is complete and total nonsense which serves more to hide the brokers incompetence than help the client/investor. The same applies equally to being diversified. Our philosophy is that you should not be invested at all (save for T-bills or something similar) un till such time that you actually have an idea and then go for it wholeheartedly by using perhaps as much as 1/4 of one’s assets. ABX is a good example. From $15 to $21 we made 40% in two months, or, if you prefer, 240% per annum not counting compounding.

In the case of ABX the hardest part is determining where to enter the trade. If done too early the gains will be dramatically eroded but oddly enough, the ultimate outcome does not change all that much. Suppose you bought at $15 but the stock went to $12, provided you held on you would still make the same amount. Why $21/22 to get out? 1. That is where c=a if you get the minimum a-b-c correction. 2. That is where the 4th wave of previous degree lies. 3. That is where the RSI goes to 70 or above. 4. That is where the MACD peaks. 5. That is when we have an acceptable EW structure for a rebound. 6. There were at least 20 other gold miners displaying the exact same pattern. 7. The mood was pretty negative, some even predicting the total demise of this company. There are more reasons but this should suffice. None of them apply NOW so why hold the stock. All this , by the way, is not that difficult. There are at least 20 stocks just this past 1/2 year or so that were presented in this blog for, essentially the same reasons, DELL, Nokia, Best Buy, TRQ , JCP maybe etc.etc. are just a few examples

RY , Royal Bank update

Hamilton

ry sept 5 2013

Back in February of this year the stock reached $65. That was the highest level we could come up with using a very bullish diagonal or wedge structure. This one is so big that we have serious doubts about the correctness. A simple B-wave from the $25 fits just as well and would even allow for a slightly higher price as the top has no significance in that situation. Either way, a diagonal of unbelievable proportions or a simple B-wave, the stock is done for all intents and purposes. It took seven months to add a single dollar!  In both counts the “target” is well below present levels, perhaps as low as $15. But this is Canada and this is the Royal, like potatoes to the Irish the Royal is the main dish for the Canadian investment industry . No self respecting investor would want to get caught without owning at least a bit of it, particularly in uncertain times, so it will take a while but once the process does start it should accelerate rapidly.