Session of 03/01/2007

[David Randolph]

Good morning

This bear market is just getting started in my opinion, as we've talked yesterday.

I still didn't write an article on the issue, but I believe gold and silver (the metals) will benefit from the economic turmoil that I foresee. The problem is mining companies look generally overvalued, when considering revenue and earnings multiples, in comparison to the market averages. Therefore I see the metals rising, but related stocks not as much. However, some stocks probably have attractive fundamentals, so I'm interested in studying gold & silver mining stocks today.

My shorts on SIGM and FRPT are going down in the pre-market. QID's are opening sharply higher.

Have a nice day

[kslifka]

How about RNO...gold stock.

[nullzero]

DOWN BIG!

[nullzero]

The way thing are going I wouldnt be suprised to see the DOW down another -400 points.

[trexkerry]

Feels odd to be up on a day when the markets are getting crushed again.  I still have my old 3SOF main picks in my watch list and  .  SYX down 10% BFLY down 11%, and on and on.  Feels like 2000 all over again

[chinaguru]

how about FMCN? thanks

[tokyopua]

My CIEN suggestion from yesterday is down 12% 

[Windsurfer]

Look at the ETF's:  SLV and GLD.

[nullzero]

This volatility is insane.

[TraderStar]

I mentioned IBM yesterday, it had a gap to fill at 88 .. the puts I bought paid off nicely this morning.  Hope some others got aboard as well.

I still think this is not the real bear market, not yet ... there will be a recovery and then when everyone gets really complacent, the real bear will begin, my guess is sometime this Fall.

By then we should all be experts in shorting 

[sfhappyfish88]

I just got my margin account approved and would like to start shorting some stocks. I have a few questions and would really appreciate your help.

1. When I place an order to sell short, I should choose "Short" type instead of "Sell", is that right? 

2. When I want to buy back the shares, should I choose "Cover" or "Buy"?

3. While I am holding the stocks, do I need to pay any interest on the shorting shares even if I have enough cash in my account?

4. Any other rules for shorting? As you know, I only have a little over $2500 on my account for now.

Thank you very much for your help.

[nullzero]

Short is to start the short position. Cover is to buy back and close the position.

[buddjas1]

This volatility is insane.

Seriously.  The market has no idea what it wants to do.  Even QID is all over the place. 

[nullzero]

Looks like the best way to play it is swing trade the QID and other short plays on the volatile swings.

[David Randolph]

1. Introduction

How about RNO...gold stock.

Yep, let's take a look at RNO. I wonder if my method is appropriate for gold stocks. I guess not. I should study probable and proven reserves, ratios between ounces and land, stuff like that. I wonder if there isn't a model for that somewhere over the internet.

But since we're here, let me apply the general method of studying stocks that I have.

2. Technical analysis
2.1. Long term chart



RNO's long term chart is bullish, in fact the stock is close to an all time high. This is interesting.

2.2. Short term chart



RNO just crossed the $3.04 resistance level, and it is trading above the 50 and the 200 days moving averages. Technical analysis is positive on the stock.

3. Fundamental analysis
3.1. Market Cap & Business Description

Market cap is $510 M. Mineral resource company with operations, development projects and exploration activities in Spain and Portugal (Portugal? How funny, never heard of this company).

3.2. Share count evolution

I see dilution over the years but not at all over the latest 3 quarters.

3.3. Balance sheet analysis

Balance sheet looks ok, but a bit on the weak side, since the current ratio is just 1.54.

3.4. Revenues

Revenues are growing nicely over the years. They're expected to come in at $197 M in 2006.

3.5. Earnings

EPS for full year 2006 is expected at $0.28, with 13 cents coming just from the 4th quarter. The stock is trading with a trailing earnings multiple of just 11.

3.6. Recent News

• Rio Narcea Gold Mines, Ltd.: Aguablanca Exploration Drilling Confirms Depth Extensions of Main Mineralized Zone
Market Wire (Thu, Feb 22)

• Rio Narcea Announces Record Fourth Quarter and Year End 2006 Production Results and Preliminary Unaudited Cash Flow
Market Wire (Tue, Jan 30)

• Rio Narcea Increases Stake in Chariot Resources
Market Wire (Thu, Jan 11)

4. General Overview

I must say I'm surprised about this company's numbers. Ahhhh, ok, this isn't a gold and silver mining company (I thought it was strange, since I don't know about the existence of gold in Portugal (we wish)). It is a copper and nickel mining company.

Therefore not really what I'm looking for, but thanks for the suggestion kslifka

5. Rating

Neutral.

This analysis was written by David Randolph from www.3stocksonfire.org after a very brief study. He might have missed several important issues about the stock that you may add to this message board and complete the analysis. David makes 10 new analysis per trading day on www.3stocksonfire.org member's request. He already covered 250+ stocks which you can find on the Stocks Covered List. This effort is also a way to find very attractive picks for the 3 Stocks on Fire Portfolio, a very concentrated Portfolio with the objective of turning $15,000 into $150,000 using small cap momentum+value stocks. To know more please read the 3 Stocks on Fire Portfolio FAQ. To receive our newsletter, be able to write on the message board and vote on polls, all you need to go through is a free 10 second registration process.