Buckets of coffee

They're drinking plenty of espresso at the EU summit and the Australian market is bouncing around as news filters out. The market had recovered on an improving Chinese inflation number to be down 40 odd points and then fell a further 50 points on news from the summit. Sarkozy is speaking now and the market has popped back up by 35 points in the blink of an eye.

I bought back half of my DJS short position at 266 on a profit target.

I'm trying to ignore the news and trade the signals; just keeping position size down. I have two new short positions to put on in CSR and FMG. FMG was close last night but was holding the little congestion, today it has been resilient intraday but the break looks convincing enough.

CSR is a nice signal as it follows a flat correction in a weak chart. I went slightly early and sold at 211.

4.12 The market gapped lower in the match to finish down 78 points at 4203. I'm short everything and had a good day but obviously, the risk of a bullish reversal is pretty high. No point jumping at shadows though.

Examining the entrails

It's 2.10 pm and the Asx 200 is down 13 points, having traded in a very tight range and performed better than most Asian markets. My best position is last night's short in DJS which is down 8 at 276. The only action today has been to cut AWC at 138 (136.5 now) as a trailing stop was broken.

I didn't really want to take this trade, I had a few ideas why at the time and I want to see if it's just bad luck or there's something specific about this trade that can help with my filters. The updated daily is below.

Maybe it's as obvious as it looks. Although there was a 1-2-3 buy signal, the rally was already quite mature and the price was rapidly approaching the pennant shaped mid range from which it had broken down. If there had been more room to move before hitting congestion then I would have been more confident about buying despite the move being into its sixth day. Alternatively, if the pause had gone on for 2 or 3 days rather than one, I would also have felt comfortable about there being some follow through.

It looks like a short now and so does FMG which has had a variation on this theme with a waning rally taking it up to resistance. I'll see how it closes.

Obviously, political considerations are providing a huge smokescreen with the upcoming European summit meaning that I'm trying to limit position size.

4.10 The match took the loss to 12 points after the index had almost reached breakeven in normal trading hours. The potential trades, both long and short, didn't pan out as the stocks tended towards the mean.

And meanwhile, I'm still thinking..

In some quarters, yesterday's sell off was painted as concern about the S&P ratings downgrade but I think that the market was due a pull back and the overnight lack of concern about the ratings agencies was fairly predictable. I still put on a few shorts, somewhat against my better judgement, but the wash up is not too bad so far. It's 2.23 pm and the market is up 30 points, coming back from an early surge and then a second attempt to rally hard with the high for the day being a jump of 54.

I'm feeling my way with my new approach of trying to initiate trades on the close. First of all, I wanted to stop out on the signal but then thought that maybe I should wait until the close. Yesterday was one of those days when I was confident that the market would sell off all day but I felt that my hands were tied thanks to my plan of waiting till 4.10 pm. It's reasonable to expect that it's a situation which could easily go my way on other occasions but, nevertheless, I feel like I can do better with my stops.

So today, I've stopped out of BLD at 378. My trailing stop was triggered with a sale at 376 after some minor initial buying was overwhelmed with selling. I thought there could be a little retracement and I decided to try 381. It quickly became apparent that the buying was minimal so I hit the bid at 378. The stock is now 371 so this looks like being a win for a more active stop out. It's been a good trade. I bought at 350 and sold half on a target at 376 and didn't want to watch passively as that good work was undone.

The flip side was in PRU where it triggered a trailing stop at 307 and I sold out at 310. The stock has now recovered to be up 5 at 315. I'm not unhappy here since I got in at 284 and sold out half at 303. It has been consolidating for a few days but is supported by its forthcoming inclusion into the Asx 100 index.

I got a bit carried away then and sold out of SEK and KAR too. There was a reasonable logic to both but I'm not sure whether it's the thin end of the wedge in terms of me beginning to override my plan. With SEK, I decided that I certainly could have stopped out yesterday. At the time, it was reasonable to decide that the momentum was enough to stretch the stop but then I thought that if I do this for every trade then I lose the advantage of stopping out on the close. That is, if I stop out when it closes below the trigger but ignore the signal when it closes back above, then I always lose out. Anyway, today there was no great momentum considering the bounce back so I got out at 612. It was a bit of a panicky exit and I should have got 616, at least, but the general vibe was right and it's now down at 605.

The last exit was in KAR where I sold out my last half at 524. This was a bright and breezy trade which went well despite my getting in quite late after a gap up to 494. That was actually part of the reason for selling out on an assumption rather than letting the market take me out. My logic was that the previous swing low had overlapped and this meant this rally was unlikely to push on to new highs. Anything close to 530 would be a good exit and the stock got as far as 527 before sellers started to dominate.

I was tempted to find an excuse to sell out of my last long in AWC but thought that I should try and respect my plan in at least one stock. I expected the short positions to give me a bit of aggravation initially after I put them on and that happened but they're fine now with the exception of the one position that I was confident about...IPL.

I'm still reasonably happy with the short position but it briefly hit my stop at 325 and I decided that since I'm confident of further weakness, I'll use the obvious retracement high of 331 to set a stop at 332-333. There was plenty of buying earlier but it has finally edged down to 321, a rise of 7.

4.16 There was a minor blip up on the match leaving a rise of 30 points to 4292. I added another short in DJS at the match price of 284 with a stop at 298.

Oh, and a quick run down of the earlier exits. BLD closed at 373, I sold at 378. KAR, closed at 515 v 524 exit. PRU 313 v 310 exit. SEK 606 v 612 sale. Better in 3 out of 4.

Gravity, the big G.

The market's down 32 points at 10 to 2 as we await the December rate cut...or not. It might have been built in so it looks like a lose/lose with no real gain from it today and the chance of a sell off on disappointment. My positions are hanging in there except for AWC which was a hard one to buy but at least I cut the position size back.

I've been debating about when to stop out. I decided last week that I'd favour stopping out on the close but it's a tricky one when you've already decided to sell. Anyway, I'll stick to the plan. The two longs to go are the balances in PDN and RSG.

PDN is just a trailing stop. My entry price was 155 and it's trading at 169.

RSG is a trailing stop but only after I held off on stopping out last Friday. I eventually sold half out on a rally to 200 but it's back at 195.5. This was an odd one where I no longer had confidence in the trade but it was recovering so I hedged my bets.

SEK did trade below yesterday's low but only briefly and on light volume. It has very good momentum so I'm less concerned about getting out.

I almost shorted IPL last Friday but wanted a clearer signal with the market so strong. There's now a 1-2-3 sell signal and the chance of a push down to the 290-300 range. My stop would be 325 so I'm hoping it doesn't fall much more today.

3.24 There was quite a bit of relief that the RBA did cut rates by another quarter of one percent although the market sold down as I figured it would. It's now 53 points lower and there are a couple more potential shorts lining up.

4.16 Out of PDN at 165 and RSG at 195 as the market closed on its lows. I shorted IPL at 314 along with a couple of others. One of the new shorts was OSH. The rally took it up to a new, recent high yesterday which was not sustained. Today there was further weakness. Short at 648 with an initial stop at 668.

My positions are now net short although I can't say I'm particularly bearish, it's just a pause in a run up. I'm trying not to second guess my fairly short term signals and I have to admit that it's paying off. Here's the Asx 200 chart; I guess it could have a couple more down days.

Irrepressible

The sixth consecutive up day - and most of them pretty strong – has the index right up at recent highs above 4300. Unlike the rally in October, this move is coming from a higher low and has the potential to test resistance around 4450-4500.

A few stocks hit a basic profit taking target so I'm out of half of my longs in:  BLD at 376 (now 382), PDN at 172 (now 173) and SEK at 617 (now 621). I've got some KAR on the offer at 520 and the stock is up 19 at 514.

The only fresh trade on the horizon is a long in AWC. It has already had a decent bounce from a recent low but has now made a new buy signal with a push through Thursday's high of 142.5. The stop will be just below the pivot low at 135.

4.12 The gains mostly held with a final rise of 33 points to 4321. Inflation and jobs are subdued and another rate cut is expected this week.

I'm pretty reluctant to buy with the index up here but I did get some AWC at the closing level of 145. I also sold out some KAR at 520 with the stock easing to end at 516.

Good vibes linger

A bit of a surprise today with a 15 point gain lingering around till now, which is 2.40 pm. The PMI numbers from China and Europe were weak but the US PMI surprised to the upside as the US economy shows ever clearer signs of recovery. China and Australia are also early in a loosening cycle with a fair bit of leeway so the market has the potential to sustain a rally.

There's nothing really happening except for the possibility of the IPL retracement being over and the next leg down underway. It seems a bit unlikely given the positivity elsewhere but I'll wait to see how it closes.

RSG traded through my stop of 193.5 on the open but I waited and there was a decent reversal. I've sold half at 200 as I expect it to recover but the picture is fuzzy now.

Otherwise, I sold out half of the PRU long at 303 on a target after early strength faded. The strength was on the back of their inclusion in the Asx 100 on the next reshuffle date of Dec 16th. I figured that the longs who were in the stock for that reason might rush for the exits but it stabilised and is back up at 308.

4.12 A really strong finish saw the top 200 index close up at 4288 which is a rise of 59 points. No new trades for me with IPL pushing up enough to keep me out.

Petrol on the fire

It was concerted central bank action to the rescue last night and the Asx 200 has responded with a relatively subdued rise of 2.3% or 96 points at 2.21 pm. I was a slightly reluctant buyer last night but there were no short signals and one more marginal long in KAR that I didn't take on top of the two that I did. The index has recovered the 4200 level and largely ruled out any short term 5th wave down to a new low under 4000.

PDN is my best performer, up 7.5%, while RSG is the worst with a rise of under 1% and trading at 197.5 compared to an early level of 207. There's not much for me to do. I had a couple of target based offers close to dealing early on in BLD and RSG but the stocks hit their peak quickly and I'm well above the market. Otherwise, it's a question of holding onto winning positions. I suppose I could look to sell out of RSG as it has been a big reversal day but I'd rather use the low set on Tuesday and Wednesday.

In retrospect, it can be hard to see why you didn't take obvious trades but it's usually because you can't imagine the market moving and you talk yourself out of it. It takes a leap of faith to be like Sergeant Schultz and say, "I know nothing". Here's QAN. When you find a bar that breaks the previous low then trades and finishes above the previous high and the market has been trending hard then you're a strong chance of having a good reversal trade. I thought myself out of this one.

And here's another one in WSA.

It's encouraging in one way; it's easy to throw up your hands this year and say, "It's all too hard", because politicians have hijacked stock markets but there are good opportunities, day in and day out or at least, week in and week out.

4.14 It was hard to buy again after a strong run today of 109 points but I went long some KAR at 494 with a stop at 456. There wasn't enough of a move yesterday but the breakout today is quite strong and the stock has been outperforming recently.

RSG finished down 1 at 195 so it could be D day for that one tomorrow.