Shifting Shares (28 July 2019) – Bottom Picking
I still remain keen eyed on shorts. This is because when key levels break, the falls can be steep. Punters wake up from their stupor that all shares go up forever, and panic sets in. Steep falls cause strong emotions, and everyone has their own puke point. Taking the other side of this trade can be lucractive.
AO World (AO.)
This company has been consistently terrible over the years, and didn’t look too appealing in their Final Results either.
Selling the breakdown here is trading with the trend and it’s a garbage company. It’s not so illiquid either so is unlikely to harbour large moves upwards. That said, some donut could always bid for it. Crazier things have happened.
APC Technology (APC)
I’m still long here and awaiting the stock’s next move.
It’s very illiquid, but can really shift. Because of it’s illiquidity I’m not going to add here, though often a backtest of the breakout is a great time to add for a low risk/reward trade.
In this instance, I’ll add at 10p when the price action confirms that the stock has now moved into an upwards trend. I’d rather pay higher and have a more likely outcome on the trade than take on more risk and guess. People love to get anchored to the price but what really matters is the pattern. I have found that I am only as good as the patterns I trade!
Column favourite Augean announced results ahead of expectations. I bought some on the bell but the stock wasn’t moving right – too much supply into good news. I crystallised the small loss and instead I’ll let them bang them out and buy at the opportune moment – the breakout.
This company is capitalised at £80 million and is about to break out into an all-time high.
The gap was due to to revenue, operating profit, and profit before tax ahead of expectations in this trading update here.
I am assuming from this that profit after tax is not ahead of expectations? So, does that mean that if they hadn’t have announced this trading update then profit after tax would surely have been below expectations?
Possibly not, but it does read that way.
Babcock International Group (BAB)
I was originally going to short this stock if it broke down, but it now appears to be coming close to a key level of resistance.
The 100 EMA looks to be tested for a fourth time now. If it breaks, then perhaps the trend is changing. If it holds, then that gives me further confidence to short the breakdown. I like simple things like support and resistance at key levels – you don’t need to do Fibonacci, Elliot Wave, Alignment of Saturn, in order to make money. Though people will happily pretend that they do.
BIDS has done fantastically well since I first highlighted the opportunity here.
Regardless of whether the business is overvalued or not, it appears to be making a base and holding firm.
If the price breaks the recent high at 44p I’d go long again. However, I’d be wary of the price bounding up quickly to that high as no doubt there is still supply around and any quick moves usually need to revert to the mean. A gradual, gentle rise would suit me nicely, followed by a big volume breakout. I can trade those all day long (and would certainly like to do so).
Sports Direct (SPD)
After Friday’s farce, this surely must be up there with the most attractive shorts. The commentary from Mike Ashley resembles something you’d be likely to read from bulletin board punters, who love to blame anyone but themselves for losing money.
So far, the price gapped down and has recovered, but for how long? The company may be buying shares back to prop up the price but I can’t imagine who else would be. The company have declined to give guidance for FY20, which is actually quite clever. You can’t announce a profit warning if there are no profits to compare to.
Capital Drilling (CAPD)
That looks like a cup and handle forming to me. I’m now watching this closely to see what happens. It’s illiquid, so definitely not one to go mad on.
Gulf Keystone Petroleum (GKP)
Gulf Keystone Petroleum is one that appears to be performing fundamentally yet not doing much in terms of price. It recently broke out of a descending wedge, and is now flatlining. I’d want to see it break out of that high at 240p at least before I went long.
Of course, the best high to buy would be 300p, but given its size and how far away that is, it may be a while before the stock actually get there.
Circassia Pharmaceuticals (CIR)
This has a similar chart to ACSO which I bought last week, then a few hours later announced an offer.
What I like about these types of charts is that they downtrend for an extended period of time, hitting a resistance spot (in this case the 50 EMA) and eventually come back to test it.
We can see that volumes have been on the rise since May and there are two huge volume days. This could be sellers clearing, but either way unless it is wash trading it is apparent that there is appetite for the stock at that level.
I’d want to be long here on a clear breakout from that trend.
Cambridge Cognition (COG)
COG is another example of that chart.
What I try to do in my trading is not necessarily trade the stocks, but trade the patterns. It doesn’t actually matter to me what the stock is valued at or what it does – everything we as traders really need to know is signified in the price. We are not trading valuations, though it is great if a stock has both strong fundamentals and a technical setup, but fundamentals are not necessary.
At the time of publication, the author may have financial interests in some or all securities discussed.