Tuesday, April 11, 2006

The rot continues

Day 8 - Tuesday
Total Account Value: $5615
Available Equity: $3413
Positions Opened: 3
Positions Closed: 0

The title of this post may be a tad negative but I'm honestly not feeling that way tonight. I've just woken up to the fact that trading is a very difficult thing to do. I'm sure many beginners start off the way I have or worse, and throw in the towel before proving to themselves they can master the system. It's the market's way of weeding out the pretenders.

I'm going to persist. Because I know from experience that certain things can only be learnt by doing. Initial failure is common and without it I would probably leave myself open to a future disaster. As long as I continue to make "smart" losses rather than inane mistakes, the outlook will be rosy.

I had been keeping on eye on Macquarie Infrastructure Group (MIG) and this morning it responded exactly as planned by gapping slightly open. A star had formed that was resting on a significant line of support. I went long 1666 share CFDs at $3.85 and set my stop loss just below the nearby 20-day Simple Moving Average (SMA). It did well throughout the day, gaining predictably with very high volume and liquidity (as always with both MAP and MIG) until slightly selling off toward the close leaving me down $66. It unexpectedly crossed over the support line despite looking strong and now all I can do is hope it was a short term sell-off that will soon be reversed.

PMN is another example of the market playing games with my head. Price action shows it has been looking weak for quite some time now:
  • After an all time high on the 13th of March the general trend has made a clear bearish reversal.
  • Twelve days later it fell strongly below the 20-day SMA.
  • Last week it tested and rejected the 50-day SMA four days in a row.
  • Following this it made an upwards rally which ran out of steam after just one day.
  • On Friday it once again tested and rejected the 50-day SMA.
  • Yesterday it finally fell below this line for the first time since January 3rd, forming a small red candle
  • Today I was poised to go short as it opened lower and fell steadily but slowly below a short term low.
However, once the order was made it began to rally in the last half hour and was a whisker away from hitting my stop loss. Reading chart signals in depth and seeing the market react differently can be frustrating at times. Hopefully PMN does as its told and continues its slow rot tomorrow.

CML continued to rise, being a bright spot for the day (not to mention the last week) and it looks like gains are still to be made as we count down to Thursday's ex dividend date. MBL once again had an indecisive day and surely now the bulls have lost faith in its ability to make new highs.

While my open positions have been a mixed bunch, I have thankfully been correct with my decisions NOT to trade some stocks. For example, my call yesterday to ignore CPU because of momentum loss (despite it being one of few to gain on a bearish day) paid off as it turned out to be one of few to fall today.

Also I noticed a pattern forming with TAH after lunch. I have had difficulty with this stock recently but I noticed that the opening price gapped slightly above yesterday's close but below yesterday's high. It climbed to reach a new 60-day high before falling back steadily, ending up well into the body of yesterday's candlestick.

Famous short-term trader Jeff Cooper calls this the "Gilligan's Island", because anyone who remains long will be shipwrecked. Noticing this so easily excited me, but I decided to be conservative and wait because I have been stung twice by TAH's trickery. Sure enough, it did a back flip and once again pushed up to new highs....there would be no re-runs of Gilligan for me today.

I have noticed that Tabcorp yesterday released their half-yearly statement, which showed very positive results. Their dividend reinvestment plan also went into effect and i'm sure this would have boosted the price somewhat. With TAH being one of few companies these days to offer shareholder benefits, there are probably a few "mum and dad" long-termers out there who participated. I'll need to wait for the dust to settle on this one.

4 Comments:

Anonymous Anonymous said...

Hey Andy

Enjoying your work here - am considering trying CFDs so intrigued by your progress. Hope you can keep the blog up while also keeping an eye on the markets!

cheers

5:29 pm  
Blogger Trader Andy said...

Glad to see I have some readers out here...

Hopefully you are noticing what not to do by reading my blog! It's a lot harder when there's money involved so when you're ready to start, make sure you go in with a plan and take it seriously.

cheers,
andy

2:03 am  
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