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FLAGS AND PENNANTS


Is Breakwater Resources Worth Buying?

11/22/06 12:53:49 PM
by Koos van der Merwe

Breakwater Resources is engaged in the acquisition, exploration, development, and mining of base metal deposits in the Americas and Northern Africa. Operations include production and sale of zinc, copper and lead concentrates which also contain silver and gold. Is it worth considering?

Security:   BWR-T
Position:   Accumulate

Despite recent operational difficulties, is Breakwater worth buying? To answer this question, we must look at a chart.


FIGURE 1: BREAKWATER RESOURCES, WEEKLY. The price of the stock moved from a low of Canadian$0.15 in October 2001 to a high of $1.97 in November 2006.
Graphic provided by: AdvancedGET.
 
Figure 1 is a weekly chart and shows how the stock price moved from a low of Canadian $0.15 in October 2001 to a high of $1.97 by November 10, 2006, in a series of cup & handle formations — some that failed with the second attempt succeeding. From April 2006, the stock price moved into a flag formation, breaking out in October. This gives us a target of $2.30 (1.70 - 0.33 = 1.37 + 0.93 = 2.30), approximately a 27% return.

I then look at a daily chart (Figure 2) to fine-tune my entry time and price and note that I received a stochastic relative strength index (RSI) buy on November 20, confirmed by a stochastic RSI swing trader buy on November 21. Both MetaStock formulas are listed below. Both indicators shown are also suggesting a buy signal. My one concern is the volume. This has fallen as the price has risen, a sign that is usually negative. Nevertheless, I would look to accumulate the share on any pullback.


FIGURE 2: BREAKWATER RESOURCES, DAILY. Both the stochastic RSI and stochastic RSI indicate this stock is worth looking into.
Graphic provided by: MetaStock.
 
Stochastic RSI Buy.
Stc:=( Sum( C - LLV(L,7), 10 ) /
Sum( HHV(H,7) - LLV(L,7), 10) ) * 100;
St:=Mov((RSI(8)-LLV(RSI(8),8))/(HHV(RSI(8),8)-(LLV(RSI(8),8))),5,W)*100;
Sty:=Ref(St,-1);
Styy:=Ref(St,-2);
St>Sty AND Sty

Stochastic RSI Swing Smooth Buy.
matp1:=10;
matp2:=40;
RStp:=5;
RSsmoothtp:=5;
plot:=Mov(C,matp1,E)-Mov(C,matp2,E);
change:=ROC(plot,1,$);
Z:=Sum(If(change>0,change,0),RStp);
Y:=Sum(If(change<0,Abs(change),0),RStp);
Ytemp:=If(y=0,0.00001,y);
RS:=Z/Ytemp;
RST:=Mov(100-(100/(1+RS)),RSsmoothtp,S);
pr:=If( HIGH > Ref(HIGH,-1) AND
LOW > Ref(LOW,-1), HIGH, If( HIGH < Ref(HIGH,-1) AND
LOW < Ref(LOW,-1), LOW, PREV));
len:=10;
maxh:=HHV(pr,len);
minl:=LLV(pr,len);
val1:=0.33*2*((pr-minl)/(maxh-minl)-.5)+0.67*PREV;
value1:=If(val1>0.99,0.999,If(val1<-.99,-.999,val1));
fish:=.5*Log((1+value1)/(1-value1))+.5*PREV;
Cross(fish,(Ref(fish,-1))) AND RST<50





Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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Date: 11/25/06Rank: 2Comment: 
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