Thursday, April 20, 2006

On the ropes

Day 13 - Thursday
Total Account Value: $4808
Available Equity: $2582
Positions Opened: 6
Positions Closed: 4

I'm starting to feel a little queasy whenever 10am rolls around. Opening action continues to devastate me as unpredictable gaps seem to be showing up on every chart. This morning it hit me like a ton of bricks. In my greatest trading tragedy so far, Coca Cola Amatil (CCL) gapped up higher than last Thursday's opening price despite it seeming that its downtrend would continue. Wednesday exhibited signs of profit taking, as the priced gapped lower and rose a small amount on high volume, unable to break the previous day's low. I went short thinking the trend would resume but was wrong. It was much too foolish a move for my risk profile and I paid a high price. I'm a Pepsi man anyway...

But it wasn't just CCL that made me sad. Despite a brief sunny interlude around lunchtime when my balance traced the positive path of the All Ordinaries it was all bad news. WOW burst through my stop loss and taught me why you shouldn't ignore "dark cloud cover" (red candlestick that opens higher and overshadows a black candlestick). It's so much easier to think positively before the falls have happened. Trading is funny in that way - when you look at the chart a few days later it all looks a bit too simple.

PMN was looking a little shaky so I cut my losses, leaving just SUN teetering on the brink of its stop loss. My balance was terrible now at around $4700. The were only two options remaining - give up or carefully rebuild. Since I'm crazy, I chose the latter and bought stock after stock as the signals appeared.

I started off quite well. Healthscope (HSP) had been doing absolutely nothing for the last month and very little since January when it shedded 29% in two days. Reminds me that I'm not the stupidest trader out there. The sellers had to be selling to someone on those days and I'm willing to bet not all of them were shorting profit takers. I read an analyst report on it from a popular newspaper this morning saying the price was not matching the performance of the company. It gapped open slightly this morning following a modest gain on Wednesday so I went long and held on as it jumped 3.5%.

Very wary of gappy openings in the Australian market, I wanted to even up my portfolio with both long and short trades. AXA showed a MACD-price divergence so I shorted once it fell below the close of its decently sized red previous day. Coates Hire (COA) and Excel Coal (EXC) were behaving similarly, with the latter meeting resistance with seemingly strong seller support. Now 5 stocks in the bag. Unfortunately it turned full circle and temporarily broke resistance before the day was done.

On the other side of the coin, John Fairfax Holdings (FXJ) and Centennial Coal (CEY) appeared to have bottomed out. Both looking especially strong with an engulfing and "three stars in the south" (triple weakening bottom) candlestick patterns respectively, confirmed with volume signals. So although my balance was down, I feel I have set myself up for a comeback. If this doesn't work, what will?

Also, I checked out guaranteed stop loss orders. The offering of my CFD provider is quite pathetic. The price is different depending on the price of the stock, which makes little sense. Placing one on a $5 (or less) stock will cost me $2. This price goes up in $5 intervals. Too bad if I want a stop loss for Macqaurie Bank (currently trading at $69). Also the guaranteed stop loss must be placed at least 5% from the current price. Ridiculous! A 5% loss is huge! Especially with an account value as low as mine.

But wait there's more! You must call the trading desk to set one, and who can really be bothered doing that? With the extent they promoted guaranteed stop losses as part of the package it really is a big sham.

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