Leap day

I heard the expression this morning to describe February the 29th. It describes the market activity too, mildly bullish overnight leads but a surprise jump of 44 points in the market at 3pm as the index has ground higher.

AWC has continued to rally. I'm not sure why because analysts are lukewarm about the stock and the US listed Alcoa is going nowhere. I've sold out half of my long at the old high of 135. I'm letting the rest run with the last sale at 137.5.

LNC is still consolidating but is up 4 to 149 with the general lift in prices. PRU has rallied 5 to 286 as gold overnight got a rise on the prospect of more money printing from the LTRO. Here's a weekly of the gold price with 1900-2000 on the cards soon.

The weekly for PRU is lagging behind slightly but I'd expect it to track the gold price by and large.

I've been looking at the NAB chart for a while and getting quite bullish but I wasn't sure why. Another injection of liquidity into European banks hadn't occurred to me but NAB has a big exposure in Scotland and the North of England. The daily has pushed out of a mini congestion after a slow correction since early December. I've bought March 2400 calls at 28 and I'm hoping for a rapid move to 2500, 2550. Here's the daily. It's an a-b-c correction for wave 2 with the third wave moving into its acceleration phase.

4.14 There was some concerted selling in the match to knock the index below 4300 for the close. It finished up 36 at 4299. I don't know why they bothered, with the amount of money printing going on round the world, it's hard to see stock prices staying down. Maybe it was a window dressing thing.

Imprudent

The index is little changed approaching the close and so are my positions on a net basis. AWC has kept running to be at 132.

LNC is having an inside day but looks ok to me. I bought another 10k at 146 which is where it's trading now.

PRU is down 9 at 279 after I imprudently leapt back in having sold at the wrong time.

The weekly looks good to me but I might have to deal with a couple more days of pullback to the bottom of the range.

It's not unlike the general shape of the Asx 200 daily and weekly except in the case of Perseus, the weekly surge up broke clearly through previous lows, a bullish sign.

No new trades.

4.04 AGO reported this morning. It initially fell to 310 but steadied to be finishing close to square at around 316, 317.

4.11 The index closed at 4263, down 5. AGO drifted to finish at 315 and PRU blipped up to 281.

Wolf from the door

Rudd, the wolf in sheep's clothing, has been soundly beaten in the ALP's leadership poll providing the backdrop to the days trade. There are a number of stocks ex-dividend today, accounting for 18 index points, so that the loss of 29 points at 1.56 pm is not as bad as it appears at first sight.

My long positions are mostly pretty good. AWC has firmed to 126 and LNC has surged to 151 while PRU is flat and AGO down 4 at 322. I'm out of some of the AGO at 325 as the stock reports tomorrow and it seems like an each way bet to me. I took the trade as a retracement and therefore the risk of failure is too high to have me hold this into the result. I'm hoping to get out of the rest as the afternoon rolls on.

The LNC chart looks particularly good on the weekly scale.

I'm expecting the market to drift sideways to down over the next couple of days so I'm going to need some continued outperformance from my longs.

3.53 The market has kept ticking down, defying generally steady markets in the time zone. The Asx 200 is off 46 at 4261. AGO couldn't get off the canvas so I sold out the last of it at 320 (v 316).

4.15 A minor bounce left the index down 39.

Lagging back

I've been out for much of the day and at 3.27 pm the Asx 200 is holding above 4300, at 4303, close to the day's highs. I'm making a point of going through weekly charts first and after cross checking the sort of analyst expectations in the FnArena website, it seems that recent rallies in commodities are not really priced in. The pre Christmas fear of a European pandemic has subsided but it isn't reflected in price targets. It encourages me to think that there might be plenty of upside in the small resource sector that I focus on.

I've added a new long in AWC at 122 and I might add a few more at the close. The January rally broke through resistance and after a slow retracement, it has made a higher low and can push towards 140. The stop is at around 112.

 

OST has peeled back to be down 12 at 103. The late day surge could be due to a rumour of Tata steel buying into the company just as the squeeze was hotting up. Of my existing positions, all long, LNC, PDN and PRU are pretty much unchanged with AGO up 6.5 at 326.5.

I'm tempted to get back into LYC but I'm not taken by the weekly. I'm also concerned that the US charts are making an upsloping wedge, the sort that precedes a sharpish pullback.

4.07 PDN reached 193.5 this morning, just short of the recent high. Despite a strong rise overnight, there has been a wall of selling today. This tips the balance in favour of a retracement so I'm selling out my balance at the match price which looks like it will be 187.5.

That was the closing price for Paladin and I bought more AWC at 124. The index recovered the 4300 level to finish at 4307, up 21, and the highest close of the week.

Sound and fury

The leadership challenge by Kevin Rudd of the ALP has created a colourful distraction for us today. The index doesn't seem to have been greatly affected. The Asx 200 is down 0.4% which is roughly in line with other bourses in the time zone.

I sold the LYC at 125 (v 123.5) on the open as news stories emerge of further local protests against the Malaysian processing plant and the lack of traction for the rebound starts to make sense.

Paladin has had a good bounce today and because I was not necessarily looking for a new high, I've sold out half at 184.5 average. The daily chart has a recent high which could be classed as the first leg of an a-b-c correction which would imply more strength but I was in two minds so hedged my bets.

My internet connection has been playing up for about an hour. Anyway, before it went down, I'd sold out half of the OST at 96.5 because after opening flat and falling to 93, the stock was struggling to get through yesterday's high. I left the rest at 103 on the off chance that the price shot through. That's happened as the stock has spiked to 105.5. The net effect is an average sale price of 99.75 versus an entry of 79.5. Here's a 60 minute chart.

AGO is breaking above the high of the last few days, up 8 at 320 now.

3.57 My system is down again. I notice, via the TV, that OST is up at 109.

Revenge of the nerds

Seek is another of the stocks in the top 20 most shorted list and that's up by 10.5%. Not as much as OST which has kicked off again with a 15 cent surge to 97 just after midday. Overall, the market is recovering from early mild falls to be down 6. I have more positions than my ideal but AGO and LYC are retracement trades and I'll get out if they lose momentum.

Back to the squeeze theme...I've gone long LNC at 142. I was in and out of this one recently as a hefty buyer was being matched by serious selling. That selling must have been shorting with LNC being one of the stocks that saw an increase in short selling by 2% of shares on issue which makes the stock vulnerable to a rally. It seems to have had a shallow a-b-c correction and to be shaping up for some acceleration. Long at 142 for just over half of my position size with the idea of topping up towards the close. Stop is in the mid 120s.

3.22 The Asx 200 is in rally mode. It has shaken off early weakness and pushed on to a 10 point rise. The weekly chart looks very good.

4.11 The froth settled but the market held on to 2 points of gain. OST was knocked down on the close again but was up 13 to 95 nevertheless. The rest were a touch lower towards the finish.

Game changer

One Steel reported a better than expected profit this morning but the two salient points are no share issue (for the moment) and the outline of areas for growth with both iron ore and mining consumables (whatever that is) performing well. Meanwhile the steel business does not look like it will deteriorate further with cautious improvements mooted although maybe not enough to take the business into the black. I posted about the binary nature of this stock a couple of weeks ago as there's a lot of value if the company does not need to raise capital. I paid 79.5 on the opening and after consolidating for an hour, OST has pushed up to 84 (at 11.42 am).

There's a large element of short covering but it also seems as if the game has changed with the inexorable selling in retail having been short circuited in BBG and PBG by private equity and in smaller resources by the prospect of expansionary policy in China. With OST, the market seemed to forget that they benefit from iron ore and the expansion there could easily add $60 million to profits next year with more to come.

There was some early weakness in AGO and PDN. I bought a fraction more AGO at 310 and doubled the PDN at 170. They've both recovered with the market which is now higher by 10 points.

11.58 I've noticed that share prices behave as if everyone is a momentum player so that stocks with intrinsic value get sold way down if there is no immediate growth catalyst even if their business cycle is thought to be only a year or less from turnaround. Apart from private equity, the only value players seem to be private investors.

2.46 The recovery gathered steam on some positive news out of Europe. The Asx 200 is up 29 at 4285 – down from a spike to 4299 – with flat markets in Asia holding us back.

I was just looking at the FnArena short report. It's a lagging indicator with the latest figures up to Feb 7 but the list is dominated by retailers and a few out of favour stocks like LYC, LNC and OST. It looks like the squeezes are kicking in...these stocks are seriously outperforming the market. For example, JBH up 2.3%, DJS up 2.4%, FLT 3.5%, COH 1.8%, HVN 2.2%, OST 13%, CSR 2.1% and RIO 1.6% compared to a rise of 0.7% in the Asx 200. The only two to be down are TRS and GNS but these are pausing after having run 10 and 15% respectively in the last week.

4.11 The market outperformed the region for once with a strong rise of 35 points helped by good results from DOW, OST and BLY. There seemed to be an attempt to knock OST down on the match but it held on to most of the gains to close at 82.

Getting dizzy

It's a tennis match; risk on, risk off, risk on, risk off and now it's risk on again. Chinese authorities have reduced reserve requirements and that's confirmed the scenario of a looser credit environment. The Asx 200 is up 1% which is not exactly reckless enthusiasm but major stocks going ex dividend adds another dozen points and with overseas markets refusing to tank, it looks as if there was a false break and a quick reversal could be in order.

I've scanned some resource stocks for possible reversals and AGO has come up. Even if it doesn't beat last week's high, it should get close. Long at 316 with a few more to buy towards the close of trade.

LYC had a steep drop after the euphoria surrounding the approval of the Malaysian processing plant. I'm long at 123.5 with a stop just below 120.

I do have another long in PDN but I didn't buy many as I'm a day late on that one. In at 174 with a trailing stop below yesterday's low at 168.

Old habits

I keep getting sucked into day trading despite having worked out that I'm better at waiting and identifying longer term moves. It's a bit of a security blanket, I think, I get the impression I'm working hard whereas it's just compulsive behaviour.

Anyway, back to the market. The world didn't end last night but you wouldn't know it judging by the Australian market. The Asx 200 is up a very grudging 10 points at 2.13 pm despite very good overnight and intraday leads. The reporting season hasn't been great but neither has it been a disaster and the only real negative this week has been the unilateral raising of rates by the big 4 banks coupled with better than expected employment numbers which has created a de facto tightening; albeit in the region of 5 to 10 bp.

I sold the last of PRU at 276 early on and I've put on a couple of day trades looking for a squeeze which hasn't eventuated. Despite that, the positions are just a tick or two down. I don't really want to put on any overnight trades because the Asx 200 has broken down but every other major index is doing ok. There are the headwinds of a high currency and tighter monetary policy but valuations, employment levels, government finances etc are pretty supportive so I don't see a reason for a big drop unless and until Greece defaults. Even that could well be fully discounted.

Sayonara

The 4200 level was cracked quite easily this morning with the Asx 200 falling as low as 4183. At 1 pm, it's at 4197 which is down 56. European and US markets are stalling and got no benefit from yesterday's Asian rally. However, the falls here exceed other markets. Good employment numbers just boosted the AUD and limit the chance of further rate cuts, a net negative for the market.

My read now is that the market has topped and a sell signal is in place. However, Japan is steady and the HSI down 0.4% leaving the local market quite extended.

I have a potential short in OSH but I'm planning to deal towards the close since an index rally back through 4200 might support stocks this afternoon.

2.12 The index cascaded further and the most recent low was at 4170 with the latest recovery pushing back to 4180, down 73. The HSI has been open for a while and is holding to a loss of about 0.7% and US futures are weaker by about 0.5%. Obviously not a good set up but the scale of the losses in Australia is surprising.

There's been a substantial buyer lining up in RSG so I decided to cut my short at 199 for a minor profit. The other positions, two longs, are open but at levels where I need to stop.

4.12 Out of CGF for just under 427 average and most of PRU for 275 so there was a minor rally to sell into and the losses were limited.

The index looks dreadful but I didn't want to chase the shorts I'm looking at because we've overshot every market on the downside and are vulnerable to a Friday squeeze.

Mixed messages

It's 3 pm and the Asx 200 has risen 9 points while Asian markets are rocketing and US overnight futures strong but the hesitation is probably due to the recent risk off mood which continued overnight.

The early action was weak but the low was 4225 and there's tons of support. I'm looking for a move up to the top of the range but there aren't many compelling buys. It was nice to come in with a clean slate though and I put on a couple of trades which, as it happens, hedge each other to an extent.

The first is a short in RSG. It's had a great run but there's a sell signal after a marginal new high. I'm short at 205 with a stop at 216, looking for a quick move down to 185ish.

Perseus is another junior gold miner. A good report today has seen the stock push through yesterday's low. I'm long at 284 with a stop 10 cents lower. If the correction is over, there's the prospect of a move above 300.

I was struggling to find longs that don't involve picking a low and I haven't really avoided that with my last new position. I've bought CGF at 433 with a stop at 420. My take is that the breakout came from the low 420s and has completed a 3rd wave and a fair chunk of a correction. The risk reward is reasonable with a 5th wave target above 460 and I'm avoiding the basic resources area which is under pressure. (Not that I'd be averse to a basic resources long if I could find one).

4.11 The market managed to eke out a gain of 11 points. Despite that, I'm confident that the choppy swing down is over and a rally is on the cards. The HSI is up 2% and the Japanese indices around 2.5%. Even the Kospi is up 1%.

Uncanny

It's a long way from over for today but after a mildly weaker open the market swept down to 4244.9 which is the exact low of the previous two days. If it holds, it's a triple bottom on a minor scale and might still herald a move back to the top of the range around 4350. We had our reaction to the Greek news yesterday and European and US markets responded in a similar way with rises between 0.5 and 1%. Just before the open, there was news of Moody's downgrades to the debt of 9 nations with the UK being the most significant but it is hard to take the agencies seriously. Resources slipped a little further overnight so my hopes of a catch up today are out of order but a drop of 35 to 4250 (at 1.25 pm) seems excessive when Asian markets are only a fraction lower.

Here's a 60 minute chart of the Asx 200 showing the (potential) triple bottom. My take is that we're seeing a pennant correction with one more move up to come.

The two new positions in AWC and PDN are mixed with losses in AWC being cancelled out by gains in PDN, which reports today. My positions are very short term at the moment with the market at a potential turning point. The last position in LNC is under pressure again despite reasonable buying. I sold out a few more at 138 on the open and it's trading at 134.5 now, off 2. It's close to support at 132.5

2.06 The index is struggling to pull away from 4244.9. If it fails, it's not overly significant because there's plenty more support between 4200 and 4230 but it makes it less likely that there would be a swift rally.

2.32 The day's low is now 4234 and the slow, choppy rally since late December is grinding to a halt. It's time to watch and wait. My default position has been long for a month or so and now it's too hard to pick. It's just a shame that the rally has never gained any momentum.

3.06 Early signs are that the PDN result is disappointing or the guidance, at least. Out at 180 compared to an entry of 179.

3.38 Japanese markets up while HSI and Kospi are unchanged. S&P futures down just over 1 point. The Asx 200 has rallied back a bit but remains an outlier with a loss of 1%.

3.54 Out of LNC at 131.5 as it breaks support. I sold a few higher up so the loss was limited to 2 cents per share on the original quantity. Should have stopped out yesterday – no real excuse.

4.12 The Asx 200 finished at 4243 which was a loss of 42 points. I stopped out of AWC on the close at 117.5. It was a bit of a slack trade and I got punished for looseness today. I'm not especially bearish, I think we're due to swing back up, but I need to be in the right stocks.

Back from the brink

The austerity measures were passed by the Greek parliament just before the open of the market this morning and helped to give the index an early lift. There has subsequently been much indecision and although the market is regaining support, it's the financials which are in favour while the risk assets are under pressure.

I sold out of the balance of PNA at 374 as it failed to find any lasting support and I also sold out of IPL as it stalled at Friday's intraday high of 340. My sale price was 338 and I held this position for longer than most of my trades but it did at least reward my patience as the entry level was about 310.

The stock price is still grinding up but I think it's stretched in the short term and I'm happy to be out.

Here's PNA. I wish I'd been a bit more aggressive when it hit my target on Friday but it has still been an excellent trade. Entry was 343.7 and exit was 377.5 so it was a 10% move in just under two weeks.

LNC has been under mild selling pressure and is down 3.5 at 137.5. I sold a third of my position at 140 but wanted to wait and see on the broad market before selling the rest.

I think the Asx 200 can have a surprise pop up to the top of the trend line in the next day or so but will struggle to get much further. For the last 6 weeks, I've been quite bullish and content to sit on longs. I think I'm going to be much quicker in and out until the situation resolves.

As a policy decision, I've decided to pay more attention to my intuition. I'm often staying in a position when I feel the time has come to exit because I'm determined to stick to my rules. I think these rules are ingrained enough to break them now and then.

2.05 The index is on the day's highs, up 23. I've been looking for a stock that might have a good pop up with the market and I've plumped for a long in AWC. I'm not convinced at this point in the day, it would need to finish strongly but so far it has reversed from a weak open and may have completed an a-b-c retracement. Plant closures are threatened so the corporate environment is cloudy but it doesn't seem to have affected analyst valuations very much.

3.25 The market has had a good run, up 39 at 4284 with a high at 4290. The resource stocks have been lagging but are beginning to catch up. AWC has hit 123 but is back down a fraction while LNC is down 3 at 138 but finding support after looking shaky for a while. The big mover has been FMG, up 26 at 550, but that has been a stock specific move based on a sizeable new investor.

Overall, I'm assuming that if there's further strength tomorrow then the resource stocks will run hard.

4.10 Since I'm short term bullish, I added another bounce back trade. This one in PDN at 179. There's a tight stop in the low 170s and I'm just looking for a move over a day or two. The stock closed at 180.

The index closed near the top of the range with a rise of 40 points to 4285.

Twists and turns

There's a deal in Greece but hurdles remain so the overnight mood was flat and, once again, there was no lead. The Aussie market is weaker but range bound and holding above recent lows.

My stocks are ok, two unchanged and one up 1.5%. The improver is PNA and it's hitting my target. I'm trying to sell half of my position at 384 but have sold a fraction so far despite being at the head of the queue at that level. The stock is a touch lower now.

I'm reasonably confident that there's more to come and 400 might be possible but I don't want to get greedy so I'm trying to finish the order at 382.

3.17 Out of half the PNA at 381 as the selling stacks up and it has slipped to 379. The Asx 200 hasn't moved though and is still down about 0.6%.

4 pm I'm not convinced that the rally is over but it could be. The market has struggled all week and is down 35 points approaching the closing match out.

4.12 The final figure for the Asx 200 is down 38 at 4245 which is half a point above yesterday's low. I planned to close out the balance of the PNA at 378 which looked well bid but missed out as a last second order took the closing price to 377. LNC slipped to 141 despite the buying being strong today but I get the impression the buying might continue for a while whereas the selling was more likely to be driven by a soft Friday. IPL was also well supported but slipped into the close.

False alarm

Chinese inflation figures for January were expected to be announced at 12.30 pm, AEST. The announcement came early at midday and an already soft market fell further. The data was weak but turned out to be last November's figures and the real figures came through just after 12.30. The headline figure was worse than the earlier false alarm at 4.5% annualised CPI inflation compared to expectations of around 4.1% but the main cause was a spike in food inflation during the holiday period. The PPI was actually better and after some more weakness, the Asx 200 recovered so that the index stands at 4275 at 2.33 pm, which is 30 points above the intraday low. The minor trend line support failed so that the a-b-c correction I initially expected (and gave up on) came through after all.

The Greek situation rolls on but a deal does seem close and overnight leads were negligible. My main decision concerned OST, as yesterday's post discussed. There was no early strength and when some selling came through, I sold the last 75k at 79.5. The stock fall gathered momentum and the intraday low was 75 so it was a good exit. It may be setting up as a higher low with a better rally to come but I think I can afford to wait and see.

IPL and PNA have performed well in a weak market, rising a few cents each, and I'm comfortable with those two positions. LYC has been more challenging. It touched 147 early, matching yesterday's high, but fell with the market to reach 141.5. It's a tad higher now but not recovering in line with the broad market. I'm in two minds. Either use yesterday's low as the basis for a tighter stop or just exit if there's no significant improvement today. The daily chart is not much help; there has been a simple pullback so another surge or a second leg down seem equally likely. There is decent support stretching back to October in the 130s but it's a fast mover and, like OST, it may be better to get out when the music stops.

I added another long position, so I'm back to four positions which is one more than my optimum. It's in LNC and I've been watching a pullback for a week or so there. Some early buying took the stock to 143 but then the market turned and it fell back to the high 130s. The break looked potentially significant and there was decent buying so I accumulated at an average of just under 137.5. In this case, the stock price has rebounded and is back at 141. My stop is in the low 130s and, as usual, I'm hoping for a burst up.

4.11 Discretion was the better part of valour and I sold the LYC at 141.5 on the match out. There was some compensation in LNC as it closed at 144 while IPL and PNA also finished strongly, up 4 at 335 and up 7 at 377. The Asx 200 nearly returned to square, dropping 8 to 4283.

Hit and miss

Still a slow grind up despite no resolution in Greece. The Asx 200 is 15 points higher at 2.38 pm and it has been a good day for my few positions.

First, the miss. I sold out of AGO at 322 which is close to the low for the day. My entry level was 314 so it wasn't a washout but a lot was left on the table. To rewind, I waited for the breakout but was bullish the previous day. Could have bought into weakness at, say, 307. There was a minor new high on Monday and no clear pattern on the 60 minute to help out so I could have got out yesterday on a trailing stop or early today. Oh well.

OST is still running but may have hit a short term peak. I'm wondering whether to bank a good short term move or not. Here's the 60 minute.

There's a potential 5 wave pattern on the 60 minute chart but no confirmation of that and the intraday congestion is fairly contained.

The daily chart is positive but, at the same time, these little surges usually go hard and today's action might be too muted.

IPL has found strong support. A line of 5 million shares was crossed early at 322 and that may have been an overhang from the recent selling. The stock is now at 331, up 10 on the day with a quick move to 350-360 a reasonable possibility.

PNA is still congesting but the odds continue to favour a new high.

The hit is a new long in LYC. The stock price surged last week as approval for the controversial processing plant in Malaysia came through. I've been hoping to buy on a retracement and have got long at 140.5. A trade recently at 145 was a break of yesterday's high and a good sign that the correction is over. The pullback had reached back to support levels so my stop is in the low 130s.

4.13 The Asx 200 closed up 17 at 4291 so there wasn't even more of a correction as I feared yesterday. Instead, the trend channel is holding up.

As regards OST. It didn't push through to a new high but it held towards the top of the range. I decided to sell 25k from an initial position of long 100k and these traded at 80.5. The other positions closed reasonably well with LYC finishing at 145.5.

RBA watch

2.06 and the market is up 11 in quiet trading ahead of a rates decision at 2.30 pm with about three quarters of economists surveyed expecting another 25 basis points cut. AGO and PNA have retraced around 1% of yesterday's gains while IPL is inching higher.

I actually went long OST at 72.5 yesterday morning despite trying to limit my position numbers. I did at least buy a reasonable amount, 100k shares with a stop at 67 for a risk of $5.5k. It has been a very good trade despite a slightly premature entry. The close overnight was 73 and the buy trigger was an intraday sale at 73.5 yesterday. My idea is that the rallies have been overlapping previous swings on the way down and the stock is seeing slightly higher lows. I was tempted to buy more early at 73.5 as yesterday's turnaround found early support but I hesitated and missed it. There was a peak at 80 and the last is 77. I think there's a good chance of a quick move to about 90.

The stock has been sold down on the premise that the steel business is so bad the company will breach debt covenants and be forced to raise capital at a big discount. This happened in Bluescope Steel but the difference here is that Onesteel has an iron ore division which may provide enough of a hedge to forestall that possibility. There is renewed optimism about iron ore prices and the company has expanded that division to take advantage of valuable excess port capacity so the discounted share issue is not a certainty. It creates a binary situation where the shorts are either going to buy back at lower levels or the stock is massively undervalued as it trades on a FY12 P/E of 6 and a FY13 P/E of 3 according to an average of analyst expectations from 7 large brokers.

The reporting date is February 21st and any announcement is expected at this time so there is two weeks for nerves to set in and a squeeze to play out.

2.31 No rate cut but the commentary is doveish.

4.06 The market fell over after the failure of a rate cut to eventuate although it wasn't crushed. There's a lower high in place just above 4300 but I'm assuming it's a correction which may, nevertheless, get into the low 4200s.

AGO made a minor high yesterday and retraced today so there's a chance that was it. I'm still long and leaning towards this being an incomplete rally.

The match out has come through, the Asx 200 fell 22 points.