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.
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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