Accentuate the negative. Tue Apr 27

Yesterday was a public holiday so we've got two days of action to digest on overseas markets. On a net basis the Europeans were strongly up, the US mildly firmer and yesterday Asian markets were very strong. The Japanese indices have held most of those gains and the Hong Kong market is just opening but in Australia bearishness has set in and early gains have evaporated.
I'm mildly skewed to the upside and slightly disappointed but not shocked as the Xjo index is pretty weak technically. Inflation worries haven't helped either as a higher than expected PPI has raised inflation fears.
A minor highlight has been a small bounce in Mmx which enable me to sell out the extra stock from Friday at a touch under 273. Atlas Iron, another smaller iron ore player, has announced a capital raising so it's quite likely that this was the cause of the sharp drop in Mmx late last week as investors may have been sounded out about the raising and sold others in the sector to make room.

My featured trade is another long in Fortescue. It really has lagged the other iron ore stocks but it's increasingly likely that the company will be able to fund most, if not all, of its expansion plans through internal cash flow and there have been some solid upgrades lately - notwithstanding a wide variety of opinion on the stock. For my part, I've gone long via some very short dated April 500 calls which I bought at 10.5 and then 7. I'm trying to buy a few more at 4. These expire on Thursday so it's an all or nothing trade but fairly low cost.

From a chart perspective, I'm disappointed that there's some overlap between this pullback and the mid March swing highs but I'm still reasonably confident that the rally has something left in it as there's a broad pattern of higher lows and higher highs.

Maybe I'm flogging a dead horse with my continued bullishness in Fortescue. It didn't get a lot of love today and weakened to 489 so that my calls are only worth a couple of cents now.