| Prologue to ZEN summary |
  |
Versatileye
Member since:
2006-01-28 - 11:52:14
Hang on Crew, it's been a busier west coast weekend than had been intended. Sorry for delay - perhaps I should not have said I'd work on a summary on Friday - but that's how I usually commit to doing something... (I can hear the pundits now...) 
The following summary of ZEN (next post) is meant for any new prospective investor today, or for that matter any shareholders evaluating their holding strategy in the hopes of short-term or long-term future price appreciation. It comes with the following disclosure:
This is not meant to be investment advice. Don’t use it as such. Speak to your investment advisor about any investments you’d like to make. I am not your advisor. I am a shareholder, and so my opinions may be biased accordingly.
I’ve decided to write a summary of sorts because I believe that some people have a hard time digging thru previous posts for info that has already been posted on TCC and elsewhere, in order to fully grasp the value proposition that ZEN represents, now that it has retraced 30% from its high of year, and is awaiting the release of news - including most importantly, it’s first 43-101 resource estimate.
First off, before the intended summary (to follow) a quick look at ZEN’s Price History:
Look at a three year weekly chart.
https://scharts.co/17Xpujw
First off, you notice the company hasn’t even been around for 3 years (2.67 actually). The stock started off at $0.65. It lost 30% in the first month, then doubled to $.90. Then it lost 75% to close out its first year, way way down. It rebounded, fell apart again, and then soared on discovery developments as high as $5 before retracing and consolidating to where you find it now, $3.83 - in advance of imminent news about how big the deposit really is.
This is to note: The share price has been volatile. It will continue to be volatile. It's a junior exploreco. It has returned higher than average returns (but ‘only’ 94.3% annual returns since December 2010 open and 100% from the initial $0.60 raising of capital). Higher risk, higher reward. Standard stuff for the industry so far. It continues to offer higher than average returns, and it will right up to the time of a buyout offer.
Unexpectedly positive developments have happened, and the stock price has done well from an oversold position. No matter what you hear the SH bashers say about recent 3600% returns (just bad math let alone logic), the stock is not ‘overbought’ at this level. Check the weekly or daily charts for RSI or Stoch’s, and you’ll see that the stock price is moving along a bullish pattern, and not in overbought territory.
A word of caution about using technical analysis indicators to judge current price action: Usually, I would suggest that for a junior, TA is equally if not more important than fundamental analysis. But during this period of SP consolidation for ZEN - there are few sellers left and buyers are trying to time their entry point, so the bids and the asks have become very thin. Meanwhile, the buying and selling of shares between TD and ‘Anonymous’ (often 100 share lots) has likewise thinned out the bid/asks. With only a few hundred thousand $ to play with, the now thinner ‘float’ can easily be controlled and the chart can be painted with short term sell signals, before quickly reversing and then repeating again. Depending on which day traders, flippers, and long term investors attempt to put up with this unpredictable activity, and which nervous investors get shaken out of their stock while it’s going on, those painting these sell signals on the stock sell 3000 shares to accumulate 4000.
Generally, this is a time proven ‘shake out’ technique (especially for the junior markets), and because of human behaviour, this accumulation activity works. It temporarily caps the share price, raises doubt on the shorter term chart, and move shares from weak hands to stronger (yet more dubious) hands. When that is happening, the value of technical indicators is greatly diminished (until news once again helps establish dynamic (aka REAL) price activity). Like other aspects of technical analysis, the pendulum swings back and forth between times of TA effectiveness and TA ‘less-effectiveness’. We're in a lull now, where TA signals are less-effective. Abandoning (fundamental) logic in favor of emotional behaviour that appears to be backed by short term TA sell (or even buy) signals is the poor man's bet.
Keep this in mind during this period of consolidation prior to news, as conviction in the stock’s fundamental value becomes more important to investment success . Patience is key to success.
Before I get on with the summary - think about this: the only analyst report to have covered ZEN's share price valuation (Roth) suggested that the share price NAV should be $10 and that $4.00 was a good price target until the investment became further de-risked.
https://tradingchief.com/stock-board.php?exchange=CDNX&symbol=ZEN:CA&company-name
=Zenyatta-Ventures-Ltd&subject=Roth-Report&pid=85334
That was based on having only 13M ton's ore at 5% grade. The Roth writeup came out well before recent drill results indicated that the deposit should end up being 5-10 times that (65-130M tons).
When the 43-101 comes out, automatically, by definition, the investment picture will be 'de-risked' considerably since the time Roth issued that report. So, instead of targeting 40% of NAV - they would normally use a higher percentage of their NAV - like 50-60%. But when the deposit is multiple times bigger than they were willing to write-up previously, the NAV they calculate will be higher as well. If the deposit truly is 5-10 times bigger than 13M tons, so that they conservatively revise their NAV to $15-$20, and then apply a 50-60% factor to that...price target moves to $7.50 minimum and maybe as high as $12.
$4 will appear all too cheap, IMO, once a compliant resource estimate is on the table. Firstly, it'll show that the deposit is economically sizable. The in-situ valuation model will be more exact. Those types of funds that are restricted to only investing in companies with a compliant resource will be able to invest in ZEN for the first time. I know Dennis and others have spoken about some funds being restricted by their mandate to not invest in companies without $$$ market cap, or $$ price per share, but actually the biggest drawback so far for ZEN has been that they do not have a compliant resource. That soon changes. Because the insitu resource model (with less what-ifs) will then be more precisely able to show the undervalued nature of the shareprice, new institutional money will begin taking positions. And the float is thin.
It's too bad I can only point quickly to the Roth report. More analysts should have written this up by now, but may also have been waiting for a compliant resource report. Independent coverage should begin to pick up. When additional write-ups do emerge, they'll be hard pressed to say anything dissimilar to what has been being said here for the last number of months...
Remember this: there is more TA and FA KSA (knowledge skills & abilities) here in the TCC community of investors and contributors than they have in the Roth office. Roth or other analysts don't have better access or better answers to relevant questions about ZEN's future developments than the TCC crowd.
Dennis says the stock is worth $8. He's simply being conservative again, pointing our attention to the next attainable price level. I'd guess he'll need to revise that before Christmas to $12-16.
Don't lose sight of the fundamental picture that has been mapped out, that's what the recent shakeout price action has been trying to get you to do (partially or otherwise).
Aforementioned summary is work in progress...
"non rompere i coglioni" 