Straight from the company’s website. This one comes from $2.60 in what we expect will become a double zig-zag. In this chart is the second part. This is semi-log scale. Looks like a triangle which could be either a wave 4 or a b-wave. For the moment wave 4 seems more plausible. If correct this would point to a price target of about 15 cents. We shall see.
At the $0.55 low an argument could be made that the correction is over, but the wave structure is by no means clear. This is pure speculation and obviously there is not much left between here and zero so on that score chances are a little better for some rebound.
Whenever you hit a top, your next expectation is that the stock will drop back to the 4th wave of previous degree and erase about 50 t0 62% of the gains it made in the entire preceding up leg. The 4th is just under $6.50. 50% is about $5 and 60% $6 so that could normally take the stock to $6 or perhaps $5. So far the stock has dropped to $7 and consequently has not (yet) fulfilled these two reasonable expectations.
Next correction always take the form of an a-b-c, which can be a flat 3-3-5 or a zig-zag 5-3-5. The drop from $11 to $7 is hard to count but almost certainly does not have the required b part un less it is the triangle as shown. For a 4th wave it is already rather big so it is a better bet that it is a b-wave triangle as shown in the alternative. That implies that the c is yet to come. Add it all up and it is probable too early to buy. As they say, good things come to those that wait.
By comparison here is another Vancouver stock that has almost completed the ride down, but much deeper than AOI;
AOI is repeated here, on the left, to make the comparison easier. Of particular interest is the RSI, in the case of CUA it went to “oversold” levels, AOI is still comfortable in the middle of the range at about 50.
The small chart (see prev. blog) suggested an initial downside target of about $0.80, on the basis of that being a 4th wave of previous degree, perhaps. As it happens that is exactly where the decline stopped but longer term there could be more to go. What we may have had was an a-b-c X a-b-c, in which case the correction may indeed be over. However , the larger simple A-B-C may still be operational (in red) in which case the stock could drop a ways further. What did happen is that the gap to the upside was closed. Our remarks concerning the incentives on the part of management having diminished substantially, remain valid. In fact, apart from their own options being underwater, they are in the process of making an agreement with Pacific Road (Sydney , Australia) that among other things calls for the sale of about 20% of the company by way of stock and warrants over the next 5 years. This transaction would be done in two separate parts and might provide as much as $45 mln. to finance the development. How this relates to Hudbay Minerals and their non-dilution agreement is not immediately clear. Their stock dropped from $30 to $7 over the past 4/5 years and they recently cancelled a $400 mln. financing. Even so , in that context $40 mln. is rather miniscule so why did they not step up to the plate? Too many questions therefore use a tight stop! The deal with the Australians requires stock holder approval, management has about 35% and HBM 14 %, so that should not be a problem.