Wow – Time to Sell Mega Uranium, and buy more Strategic Metals?

by JDH on April 9, 2007

Wow, what a day.

On Saturday I wrote that “One of my big disappointments has been MGA.TO – Mega Uranium Ltd.; Mega has not performed as well as some of my other holdings, but I’m not giving up; I’m still holding”. I also said that “Obviously some effort will be required to break through the resistance in the $7 to $7.50 area, so Mega may not be a stellar performer for the next month or so.”

Well, I was write to keep holding; I was wrong about trouble breaking the resistance, since on Monday, Mega was up 27%, closing at $8.15. So much for resistance at $7. Thanks to a newsletter writer who obviously agreed with my assessment that Mega has been a disappointment……

So now what? Can we expect another 27% increase tomorrow? I doubt it. Here’s why:

Mega Uranium

As the chart shows, every time, without exception, that Mega’s RSI has gotten to the 70 level, it has been a signal of a top. Every time. Therefore, my plan tomorrow is to sell 25% of my Mega holdings. If it continues to increase, I will probably sell another 25% on Wednesday, and wait to get back in at a later time.

The other big story today, un-noticed by the rest of the world, is that PNP.TO – Pinetree Capital Ltd. announced that “through a series of transactions ending on April 5, 2007” it purchased 13.8% of the common shares of SMD.V – Strategic Metals Ltd. This is great news, since Strategic Metals is 4% of my portfolio, and at the end of last week I was down 6% on this holding. It was up 10.5% today, so I’m very pleased.

Unlike with Mega, I have no intention of selling Strategic Metals. It made a new high today after a period of consolidation, so it’s time to buy more, not sell. Even better, the RSI is not up into the 70 range like Mega’s, so it probably has more room to run.

My plan, therefore, is to take some profits on Mega, and use the money to buy more SMD.V; let’s hope for more days like Monday!

P.S. Keep watching the uranium chart on the right hand side of this page; it should update to double digits this week!

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