Don’t sell Alliance Grain just yet – but watch for resistance

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Hey Lou,

Love reading your take and people's questions, very interesting. I am only 24, but have been and will continue to be a follower of yours.

My REITS are taking a beating over the last month or so. On the other-hand Alliance Grain Traders have been taking off.

My question to you is do I pull some gains off from AGT, then wait for the drop to $12 or less and buy back in? It's a great company and I want to hold the stock, but have noticed over the last 7 months it is on a constant roller coaster ride. There has been a big climb does that mean a big swing is coming?

My current ACB is ~11.25/share.

I appreciate your thoughts and inputs on my question.

Cheers, Ryan

Hey Ryan,

Thanks for the assignment and your kind words. Glad to see that you are getting some use from the analysis and clearly you are doing some great work yourself generating a 35.11-per-cent return on your adjusted cost basis. This will be the third time since February, 2012, that I undertake a study of Alliance Grain Traders Inc. The last time was Sept. 19, 2012, when the shares were trading for $15.49 and Joe wanted my opinion. It was noted that starting in August, 2012, the stock had pulled back and was testing support along the 200-day moving average. In addition the MACD and the RSI were not generating strong buy signals and a descending triangle had formed.

It was advised that patience would be the prudent path to follow, which retrospectively was the right call as the stock fell to $11.15 by December, 2012. Another run at the charts will help you determine how best to proceed with your holdings.

The three-year chart indicates the downtrend that started in March, 2011, has been broken and there have been opportunities to trade AGT for profits since it caught a bounce off the rock bottom in May, 2012. The golden cross that surfaced in June, 2013, would suggest this move has more to give. I would expect some resistance to come in at $16. If it can move through $16, it could run to $18 with little holding it back.

The six-month chart illustrates the buy signals generated by the MACD and the RSI in April when the shares were trading in the $11.50–$11.75 range. Currently, the RSI is indicating that the shares are just moving into overbought territory while the MACD is not providing a strong buy signal.

After examining the case for AGT, I think that you shouldn't shoot this running horse – but watch for resistance at $16.

Make it a profitable day and happy capitalism!

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