Day Trader column for May 12 - 2017

 

As of Wednesday it did not look as though the market was either impressed or disappointed with the budget.    We are continuing to see volatility around the 5,800 to 6,000 level on the All Ords and until the market breaks 6,000 we can’t be sure the uptrend is going to continue.    However, the gap between the three indices I watch (All Ords, S&P/ASX 200 and the SPI futures contract) is slowly narrowing which continues to have me believe the uptrend will continue after consolidation.

It is still likely the strength for the move will come from stocks other than the stocks which have led the moves in the market for the past couple of decades.

As per last week’s column Tawana Resources (TAW) was sold last Thursday May 04 at 23.5c per share for a total of $5,855 after brokerage.    It has continued to trade below the stop level which saw it sold, but it may still recover from the fall following the recent capital raising, as it has not yet formed a weekly pivot point to the downside, which is the first real indicator of a change of trend.

A weekly pivot point to the downside occurs when there is a weekly closing price below the lowest price of the week the highest price of the move was reached.

The A2 Milk Company (A2M) has continued to move up and is close to the first target level since breaking above the early 2016 high.    Because this has been a steady move up over the last seven trading days without the slightest pullback I have nowhere to move the trailing stop to and therefore it remains at $3.15.

This always presents me with a dilemma as to whether to sell at the target level or wait to see how it behaves.   At the moment I am staying with the latter in the expectation it will consolidate then continue the move.

This is a classic example of how I expect a stock’s price to move once it has cleared its historic highs.   This is due in some way because there are no willing sellers because when stocks owned by investors are making money they are loathe to sell.    When a stock has moved to all-time highs, everyone who owns it is making money and this greatly reduces selling pressure.

 

However, the target level for A2M is around $3.50 and we may see a small pullback while it takes a breather at this target level and this may form a daily spike low for me to use as a new trailing stop level.   At this stage there is no new target level above $3.50, but if it does pullback and form a new spike low then I will discuss how I will project the next target level.   Until then it is an unknown.

I continue to do my weekly searches and as yet have not found any stocks with strong enough patterns to convince me to jump in before the market shows its hand.

It will be interesting to see how the bank stocks finish this week after the budget changes, because at present they are a large part of the index and if they don’t reverse the move down over the last two weeks they will weigh on 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 May 10 - 2017.

 

Stock

No. of Shares

Purchase price

Stop

Wednesday’s Close

A2M

3,000

$2.75

$3.065

$3.46

 

 

Cash       $344,052

Shares    $10,380

Total       $354,432