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.