Beach Petroleum – corrective chop or buy signal?

I've bought some BPT at 152 on the basis that the stock is in a very strong weekly trend and is potentially making a buy signal on the daily chart after a sharp pullback. I'm slightly nervous because it's a risk off market with the AUD falling along with commodities and most resource stocks.

Here's the weekly. Still in a decent trend with no obvious topping out in place.

The daily chart shows this pullback did overlap the previous swing high in late November/early December but is bouncing off it. There's a minor higher low and breakout (yesterday) and my stop is just below that higher low at 145.

I actually bought a few QBE stock back near the close when it held really well. I sold out that extra stock at 1301 on the open and the last of the puts at 4. I don't think they'll be of any value now that the stock is through resistance. I also sold a third of my RMD position at 302 while PXS is steady at 118.5 as the Asx 200 retraces in a tight range. NAB is solid, up 7 at 2393.

2.43 I'm planning to go short AGO again. It had a second attempt to rally after I stopped out and seems to have failed. I'm waiting till closer to the end of day. Stop will be at about 317 with a target around 280.

4.14 Shorted a half position in AGO at 303 on the match. I was trying for higher, there was a minor rally but it couldn't hold into the close. A pretty flat day, all in all, with the index down 9 points.

Better late than never

Out of the rest of the QBE hedge at 1280 which has more than paid for the puts. It's such a strong move that the stock could easily push through the resistance around 1290-1300 but I expect the first reaction will be a pullback. I've sold out a third of the puts at 6 and I'll keep the rest which provide a bit of crash protection until the end of April.

It was all systems go last night with the DJIA through 13k and the NASDAQ past 3k. The Asx 200 is just below the pivotal 4300 level but it seems unlikely that it would stop. It might pause or chop back but a serious reversal has already been tried and failed.

NAB is firmer in a strong banking sector. I'm looking for some steady continuation of strength and since my target is around 2550, I've added some more calls, this time the April 2450s at 32 as the March calls are vulnerable to any consolidation because they only have 11 trading days left after today.

The headline refers to Pharmaxis. I didn't pull the trigger at 100 when I got a buy signal last week and I was kicking myself when it ran up from there. I've been watching the consolidation and bought some yesterday at 114 and more today at 111. I was tentative about this stock because it's in the volatile biotech sector but it had been smashed last year on a new drug approval delay and failed to recover when the yes finally came through. A lot of hot money must have been lost and it's arguably true that any bad news was overly discounted. Anyway, I just came back from the gym to find that the government has added the key drug, Bronchitol, to the Australian Pharmaceutical Benefits Scheme which means that patients will be reimbursed a large part of their medication costs.

The news has lifted PXS to 123. When I noticed this stock last week, it occurred to me that the weekly was making a higher low and a move to 180 was more than possible. Here's the daily and the weekly follows.

4.16 The Asx 200 closed up 40 at 4287. What was interesting was that after a few days of solid rally, there wasn't an intraday pullback of any size. It implies underlying strength in the move.

PXS chopped back but held on to 2/3rds of the gains to finish up 9.5 at 118.

Buy signal for QBE

An interesting start to the day has the Asx 200 roaring back with a gain of 42 points to 4239 at 12.32 pm. I cut my short in AGO at 305 for a 6 cent gain and I'm left with a short in WSA which is up 3. My puts in QBE have halved today (or would have done if they had traded) but I hedged with stock at 1201 as it broke through the top of a narrow trading band and the stock has pushed on to 1225. I still think that this is a retracement but there's a gap to the breakdown level at 1291 and if QBE can push through two recent highs at 1229 and 1230 then maybe it can get close to that 1290 level. If the stock gets to 1250, I'll have covered the cost of the puts.

The Asx 200 is closing in on resistance also, with the breakdown level (around 4248) fast approaching. It's possible that the index could fly through to the top of the range if it does break as shorts would likely be squeezed.

2.01 I've been in two minds about the bearish case for stocks because this is the time of year when the high yielding banks run very hard ahead of reporting and dividends. NAB has been forming a pennant which could have broken either way. There has been a minor buy signal today which would be strengthened by a break of the last swing high at 2385. Long the March 2400 calls again, at 22. Most of the bank charts are looking good and this could be the catalyst for a reversal to a new high for the index. Here's NAB; after the correction to 2300, it has formed up bullishly.

3.40 Out of a third of the QBE stock at 1248 with the stock now up to 1250. Have pretty much paid for the puts now. Meanwhile, the Asx 200 went as high as 4253 – through resistance – but is sitting just below now. Also out of the short in WSA at 561.

4.12 The market finished up 51 at 4248. I've switched my book around to be long. Fingers crossed.

Out of sync

I'm not quite in step and today's little surprise has been PDN. I shorted at 177.5 and it had moved back to around breakeven. I thought that 180 would just about hold if the stock had finished its rally. That seemed to be happening until a company announcement of a Canadian court victory allowing Paladin to drill in Inuit lands. The stock gapped up and I've stopped out at 185.

The Asx 200 is 11 points lower at 4201 at 2 pm and the AUD is lower as a result of weaker Chinese export figures. BHP has failed to hold on to the overnight ADR price and RIO has fallen from a flat opening to be down 0.7% but the smaller end of the resource spectrum is quite solid. FMG is moving close to my stop while AGO and WSA are edging higher.

The bright spot is a good lift in RMD to 587 and some minor weakness in QBE to 1185 where I've accumulated some more April 1150 puts at 21. The weekly chart of QBE is below and my trade is in anticipation of the recovery being complete and another leg down in the offing.

3.48 The trade in FMG was impulsive and has gone quite badly. I usually like to sell into some weakness and instead I've been caught in a whip back to a new high. I have to think I'm not the only one because the iron ore sector is going nowhere but this is up 3.8%. There is a corporate investor taking an interest but it doesn't make sense for them to chase it so hard on a day when two states have public holidays. Anyway, I'm looking to stop out by the close now that last week's high has been passed.

4.12 I stopped out of FMG at 586 as it closed just below the day's high. The Asx 200 actually fell 15 points to 4197.

Squeezing

It's 2.20 pm and the market is at the day's high of 4200, up 29. Another day of hand wringing for me as my book is positioned for a falling market. No stops yet and, rightly or wrongly, I'm not super concerned about the positions.

Europe bounced back strongly on another Greek hurdle overcome (no official word yet but it's assumed) and no triggering of CDS insurance. The US was strong too although the gains were smaller. In our time zone there was a weak trade figure for Australia implying softness in iron ore and coal but the market has recovered from that as Chinese CPI came in below expectations. More Chinese data will come through after our close and tonight sees US unemployment data for February.

My worst case scenario is an expanding pattern; one of those whippy periods at turning points where the market will break lows then reverse and break highs before topping out. However, it looks like a standard sort of retracement so far with the chance of another day or two of the same.

I've bought April 1150 puts in QBE. The stock has recovered from a downgrade and a share issue and there are a few buy recommendations floating around but the chart tells a different story, for now. The rally is petering out and there is the possibility of a sharp fall to 1000 if the sell off resumes. Perhaps there is more bad news to come out or buyers were able to soak up all the stock they wanted in the issue. Anyway, I'm looking for a good risk reward set up and at 25.5 cents for the options with about 6 weeks to run, I'm reasonably happy. Actually, a broker has just sold the options down to 22 as the stock has rallied a little, so I'm trying to average down.

4.14 The rally continued on course with the Asx 200 closing up 41 at 4212. QBE firmed with it and I bought a few more puts at 23 to take the average down to 25.

As you were

The market has slowly gathered confidence after a quiet opening to be 33 points higher at 2.45 pm. It's a reasonable result for me because it's a risk on sort of day which doesn't suit my book. However, RMD is back to square after early weakness and my resource shorts in AGO, PDN and WSA peaked first thing and haven't moved much since; up 0.5-2%.

Employment figures came out at 11.30 showing full time employment to be steady with part time employment down a little. Along with renewed weakness in PMI numbers over the last week, it raises the prospect of a rate cut next month. The AUD is also softer and the net effect is mildly bullish. Banks have bounced back well and I might missed the opportunity to get back into some NAB calls.

Overall, minor support has held in the short term but I think it's a temporary reprieve. There might be another day or two of sideways to up but a new low was made yesterday and the next swing down will confirm a change in trend.

I've put on another risk off trade with a short in FMG at 546. The first leg down was pretty sharp and broke the previous low. I'm selling into the rally and my stop is at 583, above Monday's high, but I'll tighten it up as soon as possible.

4.12 The Asx 200 closed up 27 and my resource shorts squeezed up so it was a mildly disappointing day. We could be due another one like this tomorrow.

Pausing for breath

The market is recovering intraday to be 33 points lower at 12.47 pm. Overnight markets followed our lead and went a bit further so it makes some sense. The resources sector is weak again and defensives are in favour so my positions are ok. The long is in RMD and that is unchanged while short positions in AGO and PDN are performing with AGO down 7.5 and PDN off by 4.5. I sold out of the last of the NAB calls at 15 since they're short dated and I'll wait to see if a better set up evolves.

The index is clearly through 4200 with 4140-4150 likely to provide some short term support. It was support in October and early November and minor resistance in late December.

I have a new short position in WSA at 535. My stop is above the recent swing at 570 and I think that if 520 fails then 500 should follow.

4.27 It was just a pause and the market dropped again to close at the day's low of 4144.