Shifting Shares – Brick by brick (LVCG, SQZ, BBSN, PRD)
It’s been a fantastic week on AIM. There were many short term spikes in prices, and trade on news opportunities to scalp.
G4M managed to reach a high of 220p before running into resistance. BREE has barely moved, as has HSW, and AAOG has not released any news (though that has not stopped people creating fake accounts and sending cryptic phone texts anonymously suggesting drilling has stopped!).
Live Company Group (LVCG)
This week, I bought the wedge breakout on Lego events company LVCG, and added to my position as it broke out.
Source: SharePad (all charts in this article are taken from here)
In this type of breakout on a particularly illiquid stock, I’d be risking max 15% to make 20%+. Given the price consolidation since last October, the price breaking out is telling us that this stock is moving to a significant new level. In the mid term, I feel it is likely to test 100p resistance before consolidating again. A short term target of 80p seem fair as in October this was where the stock gapped down. I was short then, but the time to be short this company is well over.
This is a genuine growth story, with CEO David Ciclitiara owning plenty of stock and doing a good job (if we forget the many years he did absolutely nothing when it was Parallel Media Group). This will stay closely on my watchlist as I think it will offer plenty of opportunities going forward.
If we look at the long term chart of LVCG, we can see the overall trend is clearly up. The market cap is only £48.5m at a share price of 71.5p, so there is still plenty of room left to grow.
I have more confidence buying growth stories at the bottom of the cycle rather than those which have been growing for years without any down periods. Those stocks got hammered in Q4 last year such as Accesso Technology (ACSO), Burford Capital (BUR), and Frontier Developments (FDEV). These stocks are good for shorting if you can catch the breakdown, but it’s much easier to be long of them in the early days. Arguably they all still have growth in them, despite the recent phase of failure.
Serica Energy (SQZ)
I bought Serica Energy again earlier in the week only to get shaken out for a small loss, but the stock is setting up into breakout territory again.
With results this week, I’m probably going to wait until they are released as there could be significant overnight risk. This has done fantastically well for long term holders and many of them are eagerly awaiting the results, but it’s a risk a trader just doesn’t need to take unless they are riding well up on the position and can bank half beforehand.
The stock has gapped up several times on news, which is a sign the company is underpromising and overdelivering, and that they also run a tight ship (news not leaking into the market and getting sold off when released). If this happens again, I’d look to trade the gap going long with a stop just below the open. It could be that I get shaken out as that is where a lot of stops in the market will be placed, but what if I don’t have a stop and the stock fills the gap? Trading is a game of probabilities and playing the odds that are in your favour.
Brave Bison (BBSN)
Brave Bison will be one fresh in peoples’ memory as it spiked over 200% back in May. Since then, it’s trundled along, before announcing a distribution agreement with Tencent. The stock gapped up but was met with heavy selling pressure – I took a small loss that day but have now bought the breakout. I’m quite excited for Brave Bison, as its recent trading update showed that trading is ahead of management expectations, and that the group will report with a strengthened balance sheet showing cash generation. However, I’ve learned that the price is the only thing that matters, and if the stock really is that good, it will show in the chart.
Investec are allegedly selling but they appear to be selling at increasingly higher levels. I’ve been monitoring the book and often there is a large overhang only for the price to continuously tick up. It’s better for everyone if they gently unwind rather than trash the price. With the stock now 100% off its lows and the dip bought I see this as the potential beginning of a new trend. 3.5p seems a good target if they don’t hammer it back down.
Predator Oil & Gas (PRD)
I personally subscribe to the view that this stock is absolute junk, but that didn’t stop it going from 2.5p to nearly 10p! Well done those that caught the move.
After consolidating since the middle of September, it looks like it is slowly working its way towards the breakout area of 9.8p. I’ve got an alert set to buy if it gets there.
The price is rising on low volume, which means that there are few sellers around at the moment but also few buyers. With a sudden increase in volume this could quickly move the stock up a few gears, so it’s one to keep an eye on for a trade. It’s one that got a lot of punter attention as it rose, but nobody likes stocks that keep going up, so I can’t see it garnering that similar attention again.
The coming week
As much as I hate the dreaded B word, I have not ruled out a ‘no deal’ scenario. Our politicians are as useful as an indicator on a BMW, and we are racing to the deadline on what seems to be a runaway mine train. If that happens, volatility will likely increase, stops will get smashed, and there will be opportunities. I remain mostly uninvested, happy to trade and then dash back to cash until the next one.
We’ve had a great few weeks on oversold bounces, but all of the major indices are still underwater and not many stocks are making fresh 52 week or all time highs. I will park the bus until it’s time to stack on risk.
At the time of publication, the author has financial interests in some of the shares discussed in this article.