We’ve had quite a few comments concerning Greencastle recently as the stock has clearly been a disappointment so far this year. Greencastle has languished entirely due to the fact there has been no news for two-and-a-half months since President and CEO Tony Roodenburg signaled to the market last fall that this company was about to get much more aggressive in the Gold exploration space. The momentum that Greencastle had going into 2011 quickly faded but that doesn’t mean it’s time to throw this stock overboard. In fact, quite the contrary. Momentum in a junior resource stock can change quickly. And the fundamentals with Greencastle are very strong with at least $6 million in working capital (13 cents per share), monthly oil royalty revenue, and three Gold properties with the possibility of another acquisition as Roodenburg has suggested. So the fundamentals should hold this stock up and propel it forward again as soon as Roodenburg starts to make things happen. Technically, rising 100, 200 and 300-day moving averages (SMA) underscore the fact Greencastle is still very much in the midst of a long-term uptrend – that’s important to keep in mind. There’s little to worry about here. John examines the rest of the VGN technical picture below:
Looking at the 6-month daily chart we see that Friday’s trading closed at strong support (horizontal green line) on reduced volume. This support appears strong because at the end of January/early February, this level was hit 3 times with the stock price then bouncing up to the 27 cent area. Another support level is shown at 20 cents. The EMA(20) has provided close bullish support during the flagpole from November to December and is now a close resistance indicator during this decline. One of the first signs of a reversal to the upside will be a confirmed white candle close above this moving average accompanied by a large increase in volume. That would be a good entry point from a TA perspective. Some words of wisdom if I may: Never “bail out” of a stock without first consulting a chart.
Looking at the indicators:
I have used the RSI(2) because we need to see how close the indicator is to the extreme position of zero so we are better able to time a reversal. You can see that except for one case in Jan., the RSI(2) reversed from the oversold condition rather quickly. On Friday the RSI(2) was at 4% at the close and pointing down. Be aware that this could reverse above 30% quickly.
The Slow Stochastics has the %K (black line) pointing down at 30% and below the %D (red line) at 40%. This could reverse quickly as well.
The Chaikin Money Flow (CMF) indicator shows that the distribution or selling pressure is now at zero. This indicates that a reversal could occur in the near future.
Outlook: Greencastle is trading in an area of strong technical support with limited downside risk from current levels. The chart pattern and indicators show that a bounce or a reversal to the upside could occur in the near future.
Note: Both John and Jon continue to hold a position in Greencastle.
Thanks John for the analysis of Greencastle’s chart. In a previous note you mentioned Pinetree Capital had been accumulating shares (I think around 25 cents), when I see Sheldon Inwentash/Pinetree and/or Joe Dwek Management/Mineralfields as insiders I’m cautious. What are your opinions on the pros and cons of Pinetree as an insider with Greencastle? Thanks.
Comment by Andrew — February 21, 2011 @ 11:34 am
Hi Andrew, to the best of my knowledge Mineralfields is not a shareholder in VGN. I share your concern with regard to Mineralfields. In terms of Pinetree, I see no problem. Sheldon has always liked Greencastle and you’re right, he was a strong buyer in the mid-20’s in November. With Gold and oil moving higher, I don’t think it’ll be long before Roodenburg gets the Greencastle train moving again.
Comment by Jon - BMR — February 21, 2011 @ 12:23 pm
Jon
do you think that tony r has been just too busy with everything going on at Seafield to really be focusing on greencastle?
Comment by GREG — February 21, 2011 @ 12:24 pm
You do raise a valid point, Greg…while Roodenburg is certainly quite capable of chewing gum and walking at the same time, the activity in Seafield since December has likely consumed quite a bit of his time. With the financing out of the way and last Monday’s unfortunate Stockwatch story addressed, perhaps he has the opportunity now to focus much more on VGN. It’s also possible that he HAS been doing a lot of work on the VGN front but hasn’t yet been able to finalize an agreement on a 4th Gold project that the company was hinting about. In any event, Greencastle is very much Roodenburg’s “baby”, he holds a substantial share position and he’s genuinely determined to move it forward in a big way.
Comment by Jon - BMR — February 21, 2011 @ 1:50 pm
Thanks Jon for the feedback, It just seems logical to me that Seafield has been taking alot of his time.
Greg
Comment by GREG — February 21, 2011 @ 4:06 pm