The US markets paused for breath last night and we're doing much the same with a small 11 point drop at 12.30 pm.
Post my holiday, I'm concentrating on trying to buy stocks with strong momentum but without discarding my usual disciplines. On the basis of this morning's experience I've got some thinking to do about how long I hold positions but overall it's looking promising. I want to be fairly quickly in and out of positions; perhaps averaging a holding time of one to two days but I can see that the temptation might be to drift into more of an intraday mode. I don't want to pre-judge this possibility but I've generally found that it's better to hold good positions overnight as most of the gains are made on the opening gap.
I suppose I had been thinking about more than just the momentum idea while I was away, but the other ideas I've had seem more like obvious strategic or procedural things which haven't involved too much consideration. These points are:
1. concentrate on buys rather than sells because of the time delays in getting confirmation when I want to short sell.
2. stick with smaller dollar stocks and lean towards the resource and energy sectors because these have the largest percentage moves.
3. avoid options as my holding time is too short to cover the spread in the long term.
4. these are only guidelines, be especially cautious of wearing bullish blinkers.
The first position is in Arrow Energy. This has been running for a week or two but had just pushed to a new high yesterday. I bought early at 374 as there was solid buying at the new highs and the stock has pushed on to 381 now.
The next one is my old favourite Fortescue. Like most of the resource stocks around, it's running and I paid 434 after it had shrugged off a weak opening and pushed past yesterday's (consolidation day) high.
On to Mount Gibson, an iron ore stock which has been slightly lagging the others and has just popped through yesterday's high having released it's 08/09 result and a quarterly activities report. Long at 99 and sold a third at 101.5 to cover costs.
The last postion is in One Steel which I bought at 290 when it broke out of a 4 day consolidation. I sold a few at 292 to cover costs and it has traded as high as 295 having edged past the June high.
In the 'do what I say, not what I do' category is Asciano. I paid 139 but this has a different tone to the other charts and I'm trading on potential rather than fact here. It is very strong, having driven up all morning on good volume and holding steady over lunch.
I think I'll sell by the close unless it runs through to new highs by then. It's one to watch certainly.
Another one to watch is Ipl, which is setting up really well. If it can close in the high 240's I'd buy some.
2.38 Sold a few more Mgx at 106 (v 99) and Ost at 298 (v 290).
2.55 The market is showing a great deal of resilience and is now square on the day despite the bank sector being muted thanks to the Nab issue yesterday. I've just bought some Minara at 91.5. I could have paid 90 as it sat there for a long time but given that nickel was strong again overnight it just gapped up early and sat at 90. It's finally soaked up the stock and is pushing on.
Sold out of Aio at 139.5 for a slight gain as I'm now long Aoe, Fmg, Mgx, Mre, and Ost which is quite a bit for my first day back. I might even sell out of one or two if I'm feeling a bit iffy about them.
3.36 Long Aquila resources at 586 (after having bought earlier today at 570 and inexplicably cut). I guess my concern is that the stock is not very liquid. It's traded about 800,000 shares today so it's not the worst and the chart is very good. A nice bullish correction and a pennant break out.
3.42 I'm scratching around, looking for a reason to cut something. I've just sold out the balance of Ost at 298 as it's stalling here on high volume. The stock looks fine but something's got to go.
4.13 I also cut Fmg at 442 (v 434) and Mre at 90.5 (v 91.5) along with a small amount of Aoe at 397 (v 374) and some more Mgx at 112.5 (v 99). It was quite a good day for the high momentum stocks but I'm equally happy to be going home with modest overnight positions. Overall the top 200 index fell 4 points.
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