How I make an investment/trading decision

[Sean K]

For long time followers of my blog here and previous personal blogs you would have see how I invest.

Find undervalued stocks and trade them on fundmentals and technicals.

I will start with a real time example, that will probably fail! lol

This is the set up:


Citigold (CTO) is a recent gold producer, but which I would still class closer to developer.

They have continued to overpromise, and underdeliver. Continually!

They have a JORC 10m oz au @ 11 g/t which is phenominal, at any depth. A world class deposit. Not many over 5m, and not many over 5 g/t. Outstanding.

And yet, they are trading at the level of a junior explorer at about $14 an ounce EV. This is absolutely crazy on the basic fundamentals of it. Crazy!!

Now, more importantly to me because of this is that their share price has been smashed. SMASHED!

While gold has run to all time highs, CTO has run to all time lows! These two things combined make my ears prick up!

So, as a value investor watching technical indicators this stock is prime to watch for a break out and trade it accordingly.

There is no way I could invest in this as at TA while it is going down, or sideways-down biased.

However, due to the (seemingly) robust fundamentals this must be placed on a close watch list for an investment.

Now, many fundies will look at this and think it is absolutely compelling. Yes, right! How many other compelling fundamental investments have failed? Too many.

The reason why the fundamentals do not speak for themselves here, is because we are not in possession of all the facts. Management has them and will hide them and sprewk them to their hearts content. In my opinion, this company has a bunch of rampers from HC behind it. '50m ounce potential'? They are idiots.

So, lets see how this experiment goes. It is just one of many stocks I follow and may invest in, or not.

I have a very negative sentiment towards them which may make me biased, but I hope not.

I'm watching the first green circle for my first tip toe in.

(I must add for perspective, I am obviously not a mechanical trader. When I find something that my judgement leads me to believe is an excellent investment, I will commit significant resources to it. I have no 2% rule, this would totally limit gains after discovering a no-brainer. This is not a no-brainer yet!)

 

[Gurgler]

Thank you for this opportunity to oversee your thinking.

Very interesting! Will watch with interest and hope things develop positively.

G

 

[Sean K]

Hi, Gurgler.

Will be interesting to watch for me too!

I suspect that they will completely fall over!

Thus, no buy until the chart backs up the ramps!

 

[outback]

Pretty gutsy thing to do, not many out there game enough to put it out there beforehand, usually only after the big break up do we hear about their exploits.

Thanks for sharing, I'll watch with interest.

 

[Sean K]

Not too gutsy outback, I do announce most of my thoughts before buying anything. I usually put it in the stock threads. This blog is just a summary of how it's going really.

CTO is an interesting one for me, because I think it's a dog! Management have continued to ramp and underdeliver for yonks.

But, the chart says bottom, and the EV to Au ratio does not make sence. It says that they don't have the ounces perhaps.

When something looks so undervalued on fundamentals it should only be traded on technicals I think.

So, I await confirmation of a floor, and if it hits the first green circle a tentative buy in until support broken, or buy more when resistance broken.

This is not the example I would like to put up, because I think management are shyte. BRM and GIR are probably better examples of my method.

 

[MRC & Co]

Nice.

Thx.

 

[Sean K]

CTO have come out with some type of capital raising which looks OK except for the options and free shares attached. I suppose they need to give stuff away to attract the investment.

15c is really looking like a bottom here. The first chart first resistance around 17/18c looks different on the shorter term chart. The 19/20 mark looking more important.

Game plan now is to see how the 15c mark and volume goes, and POG. Volume strong, 15c supported, POG steady, market not imploading, then will make a committment, maybe.

I still think they have crap management which is the No1 issue.

 

[Sean K]

CTO back down to 15c. If I was confident in their resource base I'd be all over this at this stage, but the 10m oz JORC could be a similar mythical beast to Bendigo's 11m oz WANK some time ago, and we know how that went. I have a suspiscion these guys are in the same boat. For this reason, this stock isn't the perfect example of something I could confidently go balls and all into. If I was, I would certainly be tipping in at this lower support level. Maybe not a good example to throw up, but will continue to watch for results and technical breaks up.

 

[Sean K]

Sep quarterly ann out and it's crap. See thread for my opinion.

The fundamentals are becomming clearer.

There don't seem to be any.

 

[Gurgler]

Share price now dipped to 13.5 cents - must tell management the spin is not working!

How low will they go?

 

[Miner]

what is happening Sean ? You wrote your place of residence as Vagabond ! No blog posting for a while.
Are you in real retiree now ? ASF will be parent less without your blog update

Regards

 

[Sean K]

Hi miner, Not spending much time on-line recently. Trying to get a life outside of the computer and the stockmarket. Just floating by now and then. Retired, means retired Mod. And, sold out of most stocks. Just going to enjoy interest payments for a while. Still a vagabond. Been living in various hotels in Cusco the past 3 weeks. Back to Lima on Sunday for a few weeks before heading to Central America for a bit. Cheers, kennas

 

[Sean K]

Sold everything last week and am going to sit back on the interest on interest for a little while. Heading to Guatemala over Christmas/New Year for a break. Chau!!

 

[Gurgler]

Sounds like a significant change of pace!

Enjoy the new life - will miss you.

G

 

[sion]

City Gold have traded as low as 8 cents. Now trading at nine. They have a capital raising offer at 12 cents to develop the whole mine. It does sound like gasp effort to try and stay alive. It'd suck to be a major share holder, like you know millions, because there is now no way out for them. I'm going to hold on to my lot because of the 5000 ounces they poured in the last quarter of 09. And the fact that Charters Towers once had a seriously viable gold mining industry. I know the odds are against me but hey!

 

[Sean K]

Yeah, I commented in the CTO thread about their latest movements. Market has no confidence in the deposits, or their ability to mine them. This initial start up really has been a disaster for them. I think they'll have to go the way of Bendigo and go back to exploration drilling.