Shifting Shares (24 June 2019) – Sunset for risk-on #FUTR #IGR
It would not be right to not start this report without briefly covering Future plc. This has been a printer for me over the last few years but regrettably all good things come to an end.
It started with a report in Alphaville and a note from a US firm. This sent the stock from 1250p to 895p in three days (I was on the bid at 890p – typical).
One of the reasons for such volatility, in my opinion, is that this share has slowly kept creeping up. Along with that, complacency builds, and when volatility to the downside hits, panic strikes, people sell, until the puke point is reached. I often say you should know where you’re getting out on every position, because you never know when something like this can happen.
I think it will be a while before we see new highs here at FUTR, the magic spell of “it always goes up” has now been broken and punters have awoken from their stupor. A base needs to be built with new positions being taken whilst we begin the churn back to 1250p.
This is a great company, but as a trader it’s now out of play unless we see more volatility in the coming days. Just be careful out there – it could (and probably will at some point) happen to you.
AIM 100 and AIM-All-Share
There are many commenting that it’s a bad market, and that it’s much harder to make money than before. I agree. Whilst there are always trades, you can’t just buy anything and watch it go up anymore (I do prefer this). The AIM 100 chart shows this tailwind in effect.
From July 2016 the AIM 100 soared, only to be clattered in October 2018. It gained a little but is now tailing off again. Let’s look at the AIM All-Share.
It’s a very similar pattern. I’d be interested to see this without the AIM 100 included (I’ll try and get it for next week), because they obviously make up a large amount which is why it’s so correlated.
So, what does this mean for traders? From my perspective, it means we should be risk-off. There’s a time and a place to get mega long, and whilst the S&P 500, Treasuries, investment grade bonds, junk bonds, and real estate all hit all-time highs, it’s clear that this is not the case here, and now is not that time. It’ll come back though, and those that can survive and not get too battered both physically (cash) and psychologically (emotional capital) will be in a prime position to clean up shop.
IG Design (IGR)
Historically, buying the breakout on this stock has been a highly profitable strategy.
At £500 million plus market cap, it’s right at the top end of my range. For this to add 20% of value it needs to grow by £100 million. Is it possible? Yes. It’s just not as likely as smaller companies.
Pets At Home (PETS)
And yet I find myself sorely tempted by PETS, at £980 million market cap!
Why? The trend looks fresh, they had an ‘ahead’ statement recently, plus it has the advantage of being very liquid. You can just slap the bid and get out no problem. IGR really is illiquid for a company of its size.
GOCO takeover rumours have been doing the rounds this week. In my opinion, they’re usually designed to pump the price and get someone out. I’ve lost count of how many FeverTree bid rumours there has been – in fact, we should be due one in a few weeks.
However, looking at the chart, volumes are decent. So there might be something in it, and there might not.
Nanoco Group (NANO)
This is a high risk/high reward play that may set up again. Usually, with extreme moves, there’s a bounce, and the chart has put in a hammer but I’m not convinced. I’ll be scalping on the 1 minute until I see a bullish hammer and try to capture a swing.
There was a large amount of stock uncrossing at 8.5p well above the closing price, and whilst this suggests there is a keen buyer, the supply is coming from somewhere. It was also quadruple witching so volumes are on average larger anyway. The final trade was 8.26p.
Capital Drilling (CAPD)
We appear to have retested the breakout twice now.
This makes this level more significant. However, it’s illiquid, and rarely moves much, if at all, so unless you’re looking for a longer swing I’d avoid this purely on that basis. Volumes and volatility are lacking.
Harvest Minerals (HMI)
This stock has been a bad pooch since they raised a load of cash at 18.5p, with the price languishing recently below 6p. That might be set to change.
When the results were announced in April, the stock sold off on big volume. Over the last three months volumes have been higher, flushing weak hands and those puking out. Volumes over the last two trading days were large, so I’m now watching to see if the stock dips on low volume and begins to advance.
If the sales team do their job, and sell the product, it can be highly profitable, but as one punter remarked recently – “Harvest couldn’t sell food to the starving”. At the moment, I can only agree.
Still, trends can change any time, and often for no reason. The market always continues to surprise and always will.
Results are coming thick and fast now, and there will be plenty of trading opportunities for the eagle-eyed.
[Editor’s Note 26/6/2019 – this article has been amended.]