Day Trader column for February 1 - 2019

A monthly close above 5,856 on the All Ords seemed very likely on Wednesday.   Provided the All Ords did not fall by one hundred points yesterday then we have in place the monthly pivot point to the upside I described last week.    If this recent move up, forming weekly then monthly pivot points and a break of the downtrend now leads to a consolidation around 6,000 then the next move up would have a target around 6,500.

Just how long the uptrend will continue remains to be seen, but considering the increase in the number of stocks I found setting up for a move to the upside last weekend I expect a relatively strong move to follow.

Surprisingly, after the lack of likely trading stocks in the top end of the market for a long time, this week there were more stocks in the over $2.00 scan than either the 10c to $2.00 and the under 10c scans.   This is also a positive for the likelihood of a strong move and if this is the case then we should see more of the lower priced stocks begin to take off soon.   

As I have mentioned in the past the banks did not feature in this week’s scan and it looks increasingly like they will lag behind as the market moves up.

Over recent years I have mentioned the stocks we are likely to see as the front runners in the next move up as most likely being healthcare, tech and energy stocks.   This is evident in the stocks showing up in recent scans.

Now for the first time in what seems like an eternity I have taken what I hope is the first of many trades in the near future.

On Wednesday I bought 20,000 Mount Gibson Iron (MGX) at 62.5c for a total of $12,530 including brokerage.    The targets are 80c then 90c to $1.00 and the stop is the recent spike low of 56c formed on January 24.   MGX ran up from a low around 25c at the end of 2008 to $2.40 in 2010.    From there it moved down to 17c in 2016 and at that point it broke above the downtrend line on the arithmetic chart and moved sideways until it broke above the same downtrend line on the semi-log chart in October last year.    I have found that the break of the arithmetic downtrend usually ends the downtrend and is the start of a sideways consolidation which can last for years.   If I then switch to a semi-log chart, a break of the downtrend on this scale is the beginning of the next serious move up.     I am looking for this to be a classic case of the above and for the current move to continue for some time.

I am looking for other stocks with similar chart patterns to add to our trading portfolio.

With all this optimism I am still aware that the move up could be fragile and as promised a couple of weeks ago I am still looking to exchange traded funds (ETF’s) to trade when the market begins its next move down.    ETF’s are the easiest way to trade the index as there are leveraged and unleveraged funds that are long the market and funds that are short the market.

 

 

Past columns, information and DVD’s on my methods are available at:-www.thedaytrader.com.au   

Portfolio Position as at close of trade on January 30 - 2019

 

Stock

No. of Shares

Purchase price

Stop

Fridays Close

MGX

20,000

62.5c

56c

64.5c

 

Cash       $381,712

Shares    $12,900

Total       $394,612