re: Nova Gold Short... on dilutive financing:
Message 21447979
I received innumerable nasty emails off of the above post, when I posted that I had shorted what had previously been a "core holding" for me... and one of my favorite companies and stocks amongst the emerging producers & small caps - Nova Gold.
I guess this is a perfect example that "traders" must always be READY, WILLING and ABLE to "turn on a dime" and do a "U-Turn" on any stock, or even the entire sector at a moments notice.
Now that is not espousing "daytrading"... the last thing I am, is a "daytrader"... I often go days at a time, even weeks on occassion.... without making a single trade.
Shorting NG/Nova Gold brings up an interesting subject for traders ie: sometimes you make trades on the "company" and sometimes you make trades on the "stock".
My Short of NG... was on the "stock".
My longterm expectations for Nova Gold the "company" could not be more positive...
- it is a premiere North American Asset Play, without present Geopolitical, or Currency Risk.
- it has very attractive fundamental resource value.
- it has tremendous longterm growth potential.
- it is a top "takeout" candidate.
So why the "short" ?
...simple - it was a "free money" trade.
re: DILUTION IS NOT THE SOLUTION.
Excessive Options Grants, Private Equity Placements/PIPES & any unnecessary dilution of shareholders is going to get punished, as it should... especially in this environtment.
On June 20th, NG opened at $8.80.
On June 21st, NG publically announced it's dilutive financing:
biz.yahoo.com
The next day after this announcement - NG traded down sharply on over 1 MILLION Shares, nearly 5 x normal volume.
Prior to that dilutive financing - Nova Gold the "stock" had VASTLY outperformed the HUI - ie:
finance.yahoo.com
You can see on this next chart - that NG the "stock" is now vastly UNDERPERFORMING the HUI - and that divergence occured immediately upon the announcement of dilutive financing - ie:
NG the "stock" went from significant outperformance of the HUI index - to immediate 20% underperformance - ie:
finance.yahoo.com
Here is a Chart of NG since the announcement of "Dilutive Financing" :
stockcharts.com[d,a]eaclyyay[d20050619,20050730][pb200!f][vc60][iut][j55973504,y]&listNum=-1
If the HUI Index rolls over here and retests this recent move - NG does not have strong support on the Chart untill $6.40 & $6.67 fwiw.
For those who may be short... taking "some" profits on interim reversals near that resistance line is prudent, but as far as going long, or covering the short completely... I'd wait untill NG breaks that trendline and confirms.
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