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« Centerra Gold Hit by Political Unrest. | Main | Gold Prices Update 07 April 2010 »
Wednesday
Apr072010

Fronteer Developments Group: A Gold Prices/Uranium Play

FRG Chart 07 April 2010.JPG


We purchased Fronteer Developments Group (FRG) on the 15 July 2006 at around the $4.70 level, as it offered exposure to both a uranium and gold play as FRG owned the lion’s share of Aurora Energy Resources. On the 24th September 2007 we sold 50% of this stock for an average price of $10.44, banking a profit of 122%. Fronteer is currently trading at US$6.10 so we are now in positive territory with this portion of the purchase.

Some good news and media exposure as led to an increase in the volume of stock traded which has helped FRGs stock price spike higher. The RSI is firmly in the overbought zone and is standing at 79.55 and we can see that the last time the RSI popped up above the '70' level FRG was promptly sold off. Thats not to say that history will repeat itself but it certainly looks ripe for some profit taking at the moment.

Todays hot news is that Fronteer has struck a joint venture deal with a subsidiary of Teck Resources to drill its copper-gold deposit in Turkey. You can can hear what Mark O'Dea, president and CEO, Fronteer Development Group had to say about this deal on BNN, just click here.

Mark O’Dea 07 April 2010.JPG
Mark O’Dea


Despite this good news item and the fact that we are rate this company highly we are of the opinion that it is currently running a little ahead of itself and so we decided to try and sell our holdings tomorrow.

Our intention is to put this cash to one side and re-purchase the stock if and when it drops to lower levels, something we will have to examine in more detail when we get closer to the time. This does not mean that this stock cannot make new 52 week highs, it most certainly can, but we think it will run out of steam and so we will bank the profit and retire to the sidelines for now.

Having made 122% profit on the first 50% and hopefully a small profit tomorrow on the remainder, we are reasonanly satisfied with this little venture with Fronteer . The chart also suggests that a possible options play on this stock could return a decent profit, but we'll leave that to the Options Team for now.

Fronteer Development Group Incorporated trades on the AMEX under the symbol of FRG and also in Toronto as FRG.



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Reader Comments (2)

FRG...GEEHAW!

Just one quick comment for what it's worth. The last time I decided to sell into wildly overbought conditions was with Jinshan last month. Uh, I wish I hadn't been so eager. I sold some at each new leg higher as it raced up. Thought I was being pretty clever as I saw no news to account for the big run, but the stock's now a couple of bucks higher than where I sold. That's like 60%. And all I have left is a few hundred shares. Ooops.

The point? It seems to me part of the challenge of making the big money is to sell a little less and let a bigger chunk ride on the winners, even when they're way overbought. Hard to do when I can just SEE a drop of some size coming...like the one you guys see coming...and are getting...in FRG.

Long term, FRG is a keeper, but I respect your call...as always. You guys are GOOD.

April 8, 2010 | Unregistered Commenterfallingman

Fallingman,

Thank you very much for your kind words and your astute observations, always appreciated here. Well, our sell order was placed too high so it looks like we missed the peak in terms are trying to sell right at the top. It would have been nice to have sold close to the top and then bought back again if and when the price dropped, but we may have missed the re-entry point anyway!

However, we rate this stock and are happy to hold it as they are getting things done and we think they will go higher as this Bull unfolds.

April 8, 2010 | Unregistered CommenterGold Prices

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