Friday, April 28, 2006

Freaky Friday

Day 18 - Friday
Total Account Value: $5642
Available Equity: $3211
Positions Opened: 7
Positions Closed: 8

You know those mornings where the bed feels warm and cosy, the birds are singing softly and nobody screams at you to wake up? But when you do finally pull back the sheets and stand up your head feels like it's filled with cotton wool, and there is no milk for your cereal. Just one of those days...

My cold has grown much worse and while I wish the markets would wait until Monday, I'm thankful for not having to ingest a hellish morning commute. But bad news awaits as I find out my long position on the oil price has been stopped out overnight. My opening balance looked sickly even before 10am had rolled around. And to make it worse I completely forgot about the exchange rate with the USD when setting my stop loss! Silly but not too devastating.

Worse, I also discovered that metal prices crashed - nickel, copper, zinc - so my supposedly longer term CFD in BHP looks a bit tenuous. Sure enough the All Ordinaries came tumbling down at 10am killing off BHP, TIM and ILU. Luckily though two shorts in CPU and CML were turning profitable so what could have been a disaster was averted.

Around 10 days back when this happened I shedded around $500 and remained vulnerable for the following day. The difference is greater diversification. I've realised that when trading CFDs you need to share around your available equity between 6 to 10 stocks. So even though I started off on the back foot, simply opening a few more positions that were earmarked for attention at yesterday's close would set me straight.

Healthscope was bucking the trend and refusing to fall in the morning, eventually stopping me out at a loss. The bastard started to fall again almost straight away - the stop loss just one tick too close! Never mind, I may be able to enter again next week once the indecision has evaporated. Annoyingly QBE did this to me too later in the day. Paladin Resources (PDN) was a big winner for me even though I missed out on half of the action. I had been thinking bearish on this stock for a few days now a fall in metal prices was a perfect reason to enter.

This situation is very difficult though. Many stocks gap significantly down and there is a question mark as to how much more they can fall in a day? I preferred to wait for more solid signals of overall bearishness or potential for recovery. Setting a large number of price alerts was great for making these decisions throughout the day without spending too much time constantly monitoring charts.

Rinker (RIN) is one that seems set for extended weakness as it has risen too high too quickly. Fundamental analysts have been recommending to take profits recently and the chart patterns appear to back them up. I watched as latecomers eager for some Rinker action at a cheaper price tried to force it back up in vain before relinquishing to selling pressure. Dark cloud cover was once again telling so I entered.

One positive to come out of the falls is the opportunity to go long on some resources stocks that corrected slightly. It is highly unlikely that positive sentiment has disappeared for these bucking bulls. I await Monday with anticipation.

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