Shifting Shares (8 July 2019) – A new half begins
They say it’s a game of two halves, and we now enter H2 of 2019. There have been opportunities to make money, but the market has often been flat. My preference is for large volatility as big moves can mean big profits. In any case, it’s been a nice first half, but I think H2 will present more opportunities to step on the gas and hit more breakdowns.
Argo Blockchain (ARB)
Graham covered Argo Blockchain in February here, claiming that there may be a value play here. It turns out he was right, as Argo Blockchain is now making buckets of cash. I intend to write it up this week, but for now let’s focus on the chart.
We can see that since the middle of May volumes have been higher with the price responding. An RNS on Friday announced an institutional seller. The stock has broken out and I’m looking for it to push on. I’m happy to employ a wider stop here, because the fundamentals and the technicals are in alignment.
ARB’s RNS statements outline just how much the company has changed. From September, the company will have 5,309 machines. It expects to generate 161 BTC in June, and if we extrapolate that trend to September then the company can expect to generate 304 BTC. At a price of $10,000, that’s £2.42 million. Not bad, given mining costs have been cut 39% and it’s a fixed cost business.
However, if Bitcoin dumps, then everyone will sell – even though Argo will still be highly profitable.
Accesso Technology (ACSO)
This chart shows the power of the quick shift in the mental approach. Low volatility and volumes lulled investors into complacency, then in less than nine months they’d given back over three years worth of gains. This is a good example of why I think constant vigilance is necessary.
I’d be tempted with a tentative long if price can hold here and break the 50 EMA. That’s shown to be a significant level as thrice the price has gone there and found heavy resistance. A break of this level would be the chart telling us that the stock is potentially setting up for a change of trend.
It’s not the best technical set up, as we now have people all the way up to 30p wishing they’d sold and so will be supplying stock into any rally, but for the past five or so months the stock has found and built a new trading range around 6-10p.
This was a private equity float a few years ago which went terribly wrong. It was a play on toilet and kitchen roll:
The stock has been bottoming out on what could be a stage 1 base. All of the moving averages are now upturning, and the stock is above all of them.
The stock is well above its lows, which is great, as clearly there is no pressure to sell around 10-20p as the sellers would’ve done so already. I’d be tempted with a long on the breakout of that 31p mark, but with a small position. This stock was previously (and still probably is) junk, and when you play around in a toilet nobody can be surprised if they get their fingers dirty. In a bullish market, I’d play these all day long, but there is no tailwind behind us anymore. You either adapt to the market or you get cleaned out!
This is another previously junk company, but things appear to be changing (not that I’d consider investing). Revenues are growing at a clip and they are claiming to be within reach of operating cash flow breakeven (I don’t believe them, naturally).
However, I’m keeping an eye on the stock to see if it breaks 260p. That would be a new yearly high, and a nice risk/reward. The spread isn’t great, but it isn’t wide enough to put off people jumping on board if it starts to trend upwards.
Proactis was featured last week. It’s now backtested the breakout and is setting up for another run. Volume and volatility have increased, which is what a trending stock needs.
I am looking at shorting FEVR if it breaks through that low in December. Whereas I have shorted this much higher, the trend is now firmly in my favour if it breaks through that low. However, the lower the stock goes, the higher the risk of a sudden takeover becomes.
It’s still a fantastic business, and a quality product, and now it’s on a near 50% discount to the high less than a year ago. There is a potential long trade if one is into double bottoms, but I prefer to trade with the trend. I believe results are upcoming and so I would also not wish to short a large position into this. Why bother taking unnecessary risk? It’s much better for a trader to react, rather than predict. Prediction allows the opportunity for us to be wrong and caught offside in a gap up/gap down when we are short/long.
Boohoo is another stock that was previously a darling yet in the last few years has done very little in terms of price action. History has shown us that a break of the key 200 moving averages was an excellent entry for a short trade, and so I’ll be watching closely here too.
My goal is to trade when the risk/reward is in my favour.
Burford Capital (BUR)
BUR, again, is another darling, which since last Autumn’s selloff has struggled. It’s telling when the leaders are struggling to make new highs. It paves the way for new leaders to emerge, and new darlings to fall in love with.
I’d be interested in a short here at the level identified. I’ll definitely be short if it takes out 1300p. We have a lot of tentative holders but once it dumps through 1300p many will be puking and selling. Curiously, the stock market is the only market on the planet where stocks go on sale yet nobody wants to buy them. Humans always tend to follow the herd, which served us well in times of predators when we needed to be alert, but is not a profitable activity when it comes to trading and investing.
The author may have financial interests in shares discussed in this article.