Monday, May 15, 2006

The red sea

Day 29 - Monday
Total Account Value: $4806
Available Equity: $3107
Positions Opened: 2
Positions Closed: 4

Wow! What a sight to behold today. It was the biggest single-day fall since last October as resources stocks took a king hit. My decision to avoid some of the larger players in the industry was vindicated. I wonder how all the "Johnnie-come-latelies" with undiversified portfolios felt when they left the office for morning tea today. Only the coolest, most experienced minds would have been able to shake off chaotic events such as Zinifex's (ZFX) 8% collapse. I had been raving about this stock just one week ago - I guess it just goes to show how controlled by external events much of the Australian stock market is.

Just about everything fell today with the exception of Leighton Holdings (LEI), which notified the public of an expected 20% proft increase. Not even DCA Health (DVC) could recover from a monumental drop of 19% yesterday. This serves as a valuable reminder not to enter a position simply due to a large fall or gain. You should actually wait for it to start returning to normality. Also, DVC proves that trading solely on "market sensitive" news is folly. On May 11th, a press release announced "DCA Plans Further Aged Care Growth." Second only to resources stocks, the media's other pet subject is the positive outlook for the health industry due to the ageing population. Looks like the market was having none of it.

As for me, I was unable to part the red sea, but my losses were generally contained. BNB was stopped out after a massive opening drop. Keeping looser stop losses has its benefits but on a day like today you end up losing much more than is necessary. This is one stock to keep an eye on however. Promina struggled early and just pipped my stop loss before rising back up a few cents. The annoying aspect was that this price was quite a bit below significant long-term support. Sometimes the pressure is just too great. On a day like today, the stocks that finish strongly (while still down) are the cream of the crop. PMN rallied and the buyers arose from the ruins to re-establish old support. I re-entered at $5.79.

It was my shorts in RIN and BIL that saved my bacon however. ILU also continues to fall and my target of $7 is looking more and more achievable.

Now what's the bet RIO and BHP rise by more than $1 tomorrow?

4 Comments:

Anonymous Marco said...

No... BHP + Commodity stocks expected to open well below yesterday as Gold and other commodities fell substantially. I think Gold fell $30 overnight.

2:22 pm  
Anonymous Anonymous said...

notice how bhp&rio have big gaps and little price action during the session?

this makes them poor cfd candidates imho

to become good at a game, first figure out the "rules"

7:51 pm  
Blogger Trader Andy said...

yeah, they are terrible candidates for cfds...

Look at BHPs 1 month chart, it looks like one of those statistical scatterplots.

5:44 am  
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3:17 am  

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