Trading Day: 20th April

Note: anything in quotation marks is a reference to earlier notes that I’ve made. These comments are read in context of an investor/trader with a medium term timeframe.

The S&P/ASX200 Index – XJO

The S&P/ASX200 has bounced back slightly this morning on reflated overseas markets, up 0.7% around midday. As I said yesterday, the market is by no means oversold, and is still within a short term downtrend channel.

This trend is still in its downward channel. Don't get excited yet.


The market remains in a long term sideways pattern. I continue to sound like a broken record, but only a breach of 5000 points will signify a new bull market in stocks, not a rebound rally. With the end of QE2 approaching and the banks facing earnings pressure and the big miners seeing a possible top in commodity prices, whats the likelihood of that coming to pass?

(A Note on QEasy: lless than $US100 billion is left to print/swap/debase, and even reinvesting the matured Treasuries will only yield ca. $11 to 17 billion a month. A bit less than the average $70 billion pumped in each month since August last year.)

Winners

Coca Cola Amatil (CCL): “Resistance above $12 may be the killer” – up 0.6% but still in its short term trading band. Great company, but slightly overvalued at current prices.

CBA : “Lots of institutional and retail punter support for the “market leader” in Ponzi finance” – dip? what dip? Consolidating for up-move, but pressure is mounting on the banks. Use any rally from here to check out the low cost of long term puts.

Crown (CWN): down a little this morning, like the rest of the market, getting back to its central oscillating point. Watch for close above $8.50 for new trend to resume.

David Jones (DJS): “No reason to get excited until you see a close past $4.80” – up almost 0.5%. I want to believe in retail.

Tabcorp (TAH): “Nice little breakout trend developing here, but coming up to resistance at $7.70” – yep, up 1.5% this morning and may close past resistance. I love it when a plan comes together.

Telecom (TEL): “want to see more momentum before joining the self fulfilling crowd” you got it boyo – up 3% today.

WBC : “Prices have been above resistance for over a week now, giving more and more weight to a new medium term trend” – I’m watching WBC closely as it has a lot of price support, although the moving averages are stacking (a bearish signal) and directional movement is slowing down. Short term price behavior supports an ongoing trend thesis. What do you think?

lots of support here


Wesfarmers : (WES) up 0.5% today, but I’m wary as its hitting short term resistance at $33.20 for five days now. If you believe that Coles is bashing Woolies, and I do not, than stay the course. WES remains a company with poor capital management that eventually will be reflected in its long term share price.

Worleyparsons (WOR): “the medium term (November 2010 to now) trend is still well in place” – but going sideways. Tighten stops if long.

Avoid

AMP: “Short term trend is over but medium term return to growth is not over yet” I think this is a pause in AMP’s reflation pattern. Wait.

ANZ : “reverting to mean trend/point of control at around $23.50”. Yep – there this morning.

ASX Now below value at $33, but still beware the value trap – (a bull trap for intelligent investors)

BHP-Billiton (BHP) “we need a breakout beyond $49.50 for the whole index to get past the magical 5000 level” – up 1% this morning because what else are you going to buy? Still overbought.

Boral (BLD): still in a trading range ($4.95 to $5.20) Wait for a breakout either side

Bluescope (BSL): “Finding support at $1.90” looks like found a bottom, up half a percent. You really want to touch this?

Fortescue Metals (FMG): sideways. No action yet.

Harvey Norman (HVN): still trying to complete its bearish correction from October last year. Avoid.


Macquarie Group (MQG) “might be time to cover this squid as support is heavy at $34” – indeed. MQG could rebound sharply if a new rally takes off in the broader market. Institutions are watching the relative strength of MQG to the index (and the fact its down nearly 50% since its October 2009 highs)

NAB : “Could be one to re-enter if this dip reverses” – up slightly this morning, but still a sideways bet.

Origin Energy (ORG): “you did book those profits didn’t you? Classic exhaustion top” – gapped down 1.77% this morning. Someone was listening. Stand aside for now.

QBE “QBE will struggle to get past resistance at $19 ” still sideways. Wait.

TEN : “you should all be out by now, as TEN is still in a bearish sideways long term trend” – yep, slipping again. There’s no love for ONE (or was thought Nine? Who watched Paper Giants on ABC recently? Great series. Why anyone watches commercial TV is beyond me, I only watch ONE for the GP racing)

Woolies (WOW): down slightly, continuing to be sold off by – well everyone. $26 puts remain well priced for investors – remember the 100 shares to an option revised contract comes in May….

Losers

AGL Energy (AGK): “still moving nowhere” – rebound rally has failed, up slightly on the open, but still a poor contender.

Caltex (CTX): “down to support at $14, could bounce back a little” – steady at $14. Time to cover the short term downtrend, but not a time to invest.

CSR: up 1% this morning and decelerating. Tighten stops.

Fairfax Media(FXJ) remains in medium term downtrend – but is consolidating for a possible up-move. Up 1%.

Gunns (GNS) – down another 1% today. Support coming up shortly, but no reason to get out yet.

Onesteel (OST): up almost 1% this morning, but stay the course.

Qantas (QAN): The Monkeys are back picking bottoms on QAN – Joyce is having a hard time with the unions. Did I mention that airlines are a poor business before? I’m going to “upgrade” QAN to Avoid, as in – don’t touch it.

Suncorp (SUN) “Below $8 is still my target sell zone” – early days yet, but a bottom might be in. Maybe over $8 is the time to cover?

Westfield (WDC): “about to hit support, but daylight below” – bouncing off support of $9, but likely to be in a trading range from here on.

Disclosure: The Prince is a full time equities trader, running a personal account. I may have positions (long and short) in some or all of the securities mentioned above. This post is not advice or a recommendation to buy or sell. Do your own research and consult an adviser before allocating capital.

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Comments

    • My pleasure I’m glad someone likes it. After a few weeks I might put up a scorecard to see how I went, like I used to on my old blog.

      I’m currently looking at GOLD – up to 1497 again and trending up. I’m no day trader, but damn its fun trading gold intra-day.

      Going through the ASX Small Ords at the moment – I might start reporting on them instead of the ASX100 (or maybe a few alongside). Long GNC and SIP at the moment and a few others are ringing bells.

      Much more potential (long and short) with the small caps and its the area that Q and I focus our efforts for Empire too.

      • Let me join the chorus of thanks givers, your daily posts on equities are much appreciated.

        “Much more potential (long and short) with the small caps…”

        Since I generally only trade those, I applaud your idea of covering small caps in your analysis.

  1. +1 Thanks Prince.
    Although not enjoying being smashed on some BHP April $46-$47 puts today…

    • Ouch – down 50-70% from the looks. That sux Jingles. I prefer a bit more ITM – I’ve been burnt before on OTM/NTM puts.

      I tried to get filled on 49 puts on Thursday – not enough liquidity which drives me nuts WRT Aussie options – even BHP can’t get filled???

      The contrarian in me thought about buying them Mon or Tues last week as BHP was way overbought. But I’m still a momentum trader, not ABC trader – not yet at least.

      The exchange is going to 100 lots in May, which is fantastic news, although I can already see the wealth management houses rubbing their hands with glee selling covered calls strategies to the punters.

      • Cheers for the commiserations Prince. I’m new at this and nothing teaches like (negative) experience I guess.

        Spot on about the liquidity issue. Have been in the same situation a couple of times as well. Even the liquidity on the underlying stock makes me shake my head. Only $280M worth of BHP traded today and avg trade worth only $28K each…?! No wonder brokers are dropping like flies.

        Good news about the May change to 100-lots.

        Will just have to keep up my edu-macation. Thankful to have found this blog – thanks to all of you for putting in the time and sharing the benefit of your thoughts and knowledge.

        Time to get back to my day-job methinks…thanks again.

  2. Thanks i also appreciate this one. I managed to dump my NAB at 26.50 a few days ago for a decent profit, but i figure it’s money better “invested” elsewhere.

    WOW is going to look very compelling LONG-TERM if it dips under the $26.00 mark. Coles can’t outperform forever by just throwing cash at a neglected business coming off a low base. Incidentally i invested in WES close to the GFC low on the basis that Coles would outperform WOW comparatively on this basis.

    At some point, and i think it’s getting closer, Coles won’t simply be able to achieve greater comparative growth doing what is has been doing for the last few years, at which time i think it will be a good idea to pick up some WOW.

  3. Hi Prince,

    I love your blog and read it every day. Please keep it going.

    WBC – I have some self funding installments that are under water by…not very much at all. I am enjoying your comments on WBC…it makes sense.

    QBE – Same story – looking to get out real soon – enjoy your commentary on it. (and the others).

  4. Deus Forex Machina

    Interesting close Prince…thats a scary candlestick on the dailies for the bears…might be thin trading up not down???

  5. Prince your analysis is excellent, you are a valuable part of this brilliant site

    Have you thought about doing a piece on some riskier small caps I know it is high risk, but when you get it right it is so so right.

    My favorite trade of last year was AUC at 19c , I managed a new car for my wife out of that trade. I understand however if you think that sort of thing is too speculative

  6. Thanks for all the nice comments folks.

    I’ll try to integrate my scans of the ASX Small Ords into Trading Day.

    Lots of short and medium term opportunity in that index.

    Here’s what came up this morning as possible winners:

    BND
    CFE
    HIL
    IFN
    MRU
    RHG

    I’m also watching Mondalpheous (MND) and AMX closely, but no entry signal yet.

    As for the ASX100, I’m going to add SKI, ORI and NCM to the list of possible winners.

    On a related note, I’m still trying to work out how to physically trade the NZ50 index (and indeed, NZ stocks). Although a shallow market, the stocks there “work” with my trading systems extremely well.

    Any ideas? I’ve tried CFD’s, ETF’s, everywhere – can’t find a way to do it….