Lou, entry point for AGF Management Limited? Possible buy or should I hold off?
Hey Darren, thanks for the assignment. This will be the second time I review the case for AGF Management Ltd. this year. On May 30, 2012, when the shares were trading for $11.87, Trevor wanted to know if the shares were oversold and if the dividend was safe. An examination of the charts indicated that the shares had been oversold for a month which is interpreted as a sign of weakness, investors were not motivated to buy even at what appeared to be low prices. It was a also observed that the selling pressure had been relentless along the downtrend that started in June of 2011. Every level of support had been breached. It was advised that the most likely outcome would be a retest of support at $11 and that it would be best to see if the stock could build a base in that range.
Another go at the charts will help determine if now is a good time to get on this ride or if more work needs to be done before risking your capital.
The three-year chart is "butt ugly," as my sister used to say. The shares did retest $11 and caught a bounce that took it to $13 where it met resistance on the 200-day moving average and quickly beat a retreat that breached support on its way to lower lows. Bottom fishing is a tricky business and as Jordan Kotick, Head of Technical Strategy at Barclays, taught me – confirm the bottom don't anticipate it. The MACD generated a buy signal off the June 2012 lows but the surge that took the shares to $13 in late August required great execution to hold fast on a wet rope given that it was all over in seven session.
The six-month chart is not providing any support for a buy. The MACD and RSI are essentially flat and the downtrend is still in place. The next level of support comes in at $8 which is not that far off. If the momentum indicators turn there could be a trade but it will not signal a reversal of this painful period for shareholders.
Make it a profitable day and happy capitalism!
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