I bought shares in another Canadian gold miner yesterday. This one is Lake Shore Gold Corp (LSG) which trades on the AMEX exchange. My purchase price was $1.47.
This first chart is a weekly of LSG and uses the slower 'trending' setting of the True Strength Index (TSI) indicator set at (25,13). The TSI rendered three BUY signals which I regard as strong confirmation this stock has turned the corner on its downward momentum and should see better days ahead soon.
The next chart is a daily and compares the price performance of Lake Shore Gold (LSG) with gold (XGLD) and the Junior Miners ETF (GDXJ). Here we see the familiar TSI BUY signals, as on the weekly chart above - trend line break, positive divergence and ZERO crossover - and note that this stock has severely underperformed both XGLD and GDXJ beginning last May, 2011. We also note that Lake Shore Gold now trades at just 60 cents on the dollar with respect to its book value.
I have done several hours of due diligence to learn what explains the sky dive from $4.50 per share to $1.05 in the past 9 months. The company has several mines in Canada with one that went into production beginning January 2011. The expectations for the amount of gold they could process were lowered by the company at about this time and that triggered several analyst downgrades. Add to that the general swoon one can easily see in the GDXJ beginning last May and the recipe for price to move to the opposite extreme was put into action.
My interest in this stock begins with its ridiculously under priced stock market valuation and is sustained by the technicals (TSI) that suggest it is a candidate for price appreciation in the near future. Also, the current book value of Lake Shore Gold is $1 Billion and it began trading on the AMEX exchange last August.
Price projections are usually tough to get real excited about because they are often overly optimistic, or so my experience has led me to believe. But, for what its worth, here is what the 11 analysts who follow this company think about its prospects for future price appreciation (Jan. 26, 2012).