Doldrums. Fri Oct 29

It continues to be desultory trading as everyone awaits the announcement on QE2 on November 3rd. The Australian market has been a range bound underperformer so we clearly fear the worst. What would the worst be? I suppose it could be QE2 being much smaller than expected or postponed, causing the US dollar to bounce, the AUD to fall and commodities to fall. The carry trade would be unwound and we'd have a short sharp downswing.
I wouldn't say that we've baked that outcome into the cake, the commodity stocks could easily get hammered in the short term, but it's also easy to imagine an outcome where QE2 is larger than expected and there's a great big short squeeze. I guess the upshot is that it might be wise to reduce position size, along with everyone else, and wait for the big announcement.

12.36 It's ever diminishing circles as we retrace yesterday's gains. Here's a 30 minute chart of the Xjo.

Arafura and Lynas have come back today. Aru is just down 2.5 while Lyc is down 10 at 148. It's back to around my entry point although I got a few away yesterday at 158.
I've bought some Pna at 74.5, about a third of my position size. They might have made a double bottom with the pullback - or not. If they tick lower I'd buy a few more at 72ish. Stop is close.

1.40 The loss has been trimmed to 16 points.

I'm thinking about my strategy vis a vis QE2. The news will come through before the Thursday session but Tuesday is Melbourne Cup day which might decrease activity on Monday also. I presume the market is going to continue to chop around until then.

The wisest course is not necessarily to just cut all my positions if they're charting well enough but I certainly want to decrease position size so I'll try to do that into strength.

3.25 Out of the extra Aru at 139 as they recover to be down 1. I still have some placement stock which doesn't come on stream for a week or so. No such recovery in Lynas which is down on the day's lows at 146. It's all very ho hum now that I've decided to sit tight until next Thursday.

4.16 The day seemed to take forever, down 23 points.

The month has ended, I scratched out a tiny gain but I'm glad it's over because if I hadn't started messing about with my approach, trying to change things, then it would have been another solid one despite the market being choppy and difficult.

There's a good chance that November will be better once the QE2 announcement is out of the way.

Murchison again. Thu Oct 28

A late recovery in the US and they finished mixed but gold and base metals were down. Our bipolar market has swung back to optimism and we're back up 1%.
The placement in rare earths hopeful Arafura went off well bid at 120 and it has taken the selling pressure off Lyc. It looks like they've held support above 140 and they're up 8.5 on the day to 154.

Buoyed by that, I'm thinking of buying some Aru as well, they've had more of a retracement and have held support above 124. I did get a few in the placement at 120 and that tells you that the stock did trade below 124 but the freely traded market has held support - grey area I suppose. Anyway, I figure that I can buy a few more in the market but I'm looking for a retracement of the initial bounce.

Here's the 30 minute for Aru.

I followed through with the Mmx long idea and bought at a tick under 156 which is about where they are now. Stop is in the low 140s and there's a good chance of a quick move above the recent high.

Fortescue has issued $2bn of bonds with more to come perhaps. I don't know if it's going to pressure the stock price too much but I'm looking for a shorting opportunity with a marginal new high having been rejected quite strongly. I'm hoping to get short at about 645 to 650 and the highest it has been today is 640. If I get set then I'm happy and if not, my stop will be too far away for me to be comfortable. Here's the daily.

12.45 Out of Avo now at 309 as they failed to kick on. See discussions yesterday.

2.40 The market has given back about 10 points. Fmg has turned South, down 7 at 621 - that's looking like one that got away. Lynas is still firm, up 10 at 155.5.

4.11 The index didn't do too much in the last hour or so, finishing up 37 points.

I sold a few of the Lynas out at 158 and earlier, bought 15k of Aru at 137.5. Not a great entry which is why I only bought a few and I sold 5k out at 140. The new shares don't start trading until Nov 8.

I'm looking at Pna again. They fell 3 today to close at 73.5. I still think they might find support at 70 so with 68ish as a potential stop, I'm hoping to get some tomorrow at, say, 72.

Stretching the friendship. Wed Oct 27

The overnight lead from the US was negligible but the Nab result has given the banking sector a fillip and the overall market is up 5 points after an hour or so with the banks leading.
I bought more Lyc at an average of just under 149 as I'd hoped for but the stock is under heavy pressure and is just above support at 142. Be careful what you wish for.

I've stopped out of Pna for a profit at 77.5. I was hoping for a new high, but this may need to have another look at support first. I bought this lot at 74 and would start to buy back in if it got back to that level. There are a couple of broker downgrades over concerns that their costs are rising.

11.34 On Monday I bought some Avo at 308 using a signal from the 60 minute chart. My stop would have been too far away to take a trade if I was to use the daily chart and I was expecting a short term bounce in the gold stocks. At the time I was pre-empting a breakout of 310 while using 298 as a stop. My target was the recent high at 330 and I was hoping for a quick trade. I sold a quarter out that afternoon at 320 and another quarter yesterday afternoon at 319.

I mentioned that I expected the holding time for this position to be short; perhaps a half to one and a half days. Well, it has been two days now but I'm still using the 60 minute chart, it just hasn't completed - or failed to complete - the pattern I was forecasting. At the moment, my stop for the remaining half would be at 309 if it failed to hold the breakout level. At present, I'm assuming that it's in the c leg of an a-b-c correction of the move from 305 to 322.

If the stock gets to 330, or the mid to high 320s, then it might seem silly to have sold out half of my holding below that but my justification is that I find it much easier to be patient with the position if I've taken some profit along the way. It also becomes easier to pull the trigger in the event that I stop out for around breakeven because I know that there's something to show for the trade.

Lynas is still under pressure but has steadied to be back at 146.

11.57 Just thought to have a look at the CPI which came out at 11.30. Slightly better than expected, 0.7% for September cf expectations of 0.8%. The AUD fell close to a cent very quickly and has stabilised at around 98. The reserve bank will be happy, we already have a two speed economy and another rate rise does nothing for that.

1.16 There's been a further recovery in Lynas and it's back at 151. I sold out a few at 152 as I bought some extras. Risky business but the stop was increasingly close! That's about it though, the Xjo is up 2 points and the AUD is back at 97.7.

3.08 The market cracked down shortly after the last update. It's down 46 points at 4642 and just above where I though support might be.

So it's still a difficult market to trade. We seem to have led the Asian markets and US overnight futures down after they were steady to firmer early on. At this point I'm not taking it too seriously. It's the sort of market where you buy after a few down days and sell after a few up days.

I was worried about Lyc as they fell back to 143 on the sell off. They held, at a higher low, and have ticked back up to 147. Otherwise, Linc is down 5.5 at 192.5 but I'm looking at a stop a fair bit lower there, around 180.

4.11 There was a slight rally and the Xjo finished at 4648 with a low of 4641. This was 40 points down.

Not a lot of comfort in my long positions but the damage was mild.

I cut Bsl yesterday and it fell further today, closing at 205. I was thinking about a small buy at these levels given that support is close but the two legs up, in July and then September, were possibly retracements so it's more likely that there'll be a new low soon.

Mmx is one that I'm more interested in buying. It gapped up about a week ago on a positive court ruling. If it wasn't such a weak day, I'd probably have bought some on the close. A stop at 144 is a fair distance away, but the set up would require a third wave which might be expected to be at least as big as last week's 32 cent turnaround and probably closer to 50 cents, giving a target around 200.

Actually, a move of that size is hard to imagine, given how long this stock has been under pressure. Nevertheless, I like the set and would be happy enough with a move above 177.

Textbook session. Tue Oct 26

As October rolls towards the close, the index is retracing yesterday's gain but I think the pattern is bullish and I expect it to push on higher in the next day or so. Here's a 60 minute chart.

The US indices were up last night but fell from early highs and the April high is the next mountain to climb for the Dow. Gold held on to the USD 11 gain from our session but retraced further early gains which were made overnight while base metals firmed up a percent or two. It's 11.17 am and the index is down 14 points.
I've done very little, selling out of Bsl for a small loss at 212 as it looked ready to run yesterday but failed this morning.

I think it's now more likely to edge down to the August low - perhaps, just above it - which might offer another low risk entry.
Otherwise there's not a lot of change in my holdings.

3.05 I'm really zonked after going to the dentist at lunchtime and getting a double shot of local anaeshetic. Fortunately, the market is having its classic pullback day and I'm missing very little.
In the rare earths space, the two main stocks are Lynas and Arafura. Aru is having a placement which will be finalised by close of trade tomorrow. In the meantime, Lyc is weak and I've been looking at levels where I might buy some. There's strong support between 132 and 138 and the last run up took the stock from 127 to 179. 50% of that takes you back to 153 and a reasonable stop would be 136.
I was a little conservative earlier and put a bid on at 148; the lowest the stock has gone today is 153.

4.13 The Xjo closed down 22 points. I sold another quarter of the short term Avo position at 319 as it stalled. I took profits in another similar position and went long some Lynas at 155.5 which is about the lowest level at which it traded much volume. I'm hoping to get more tomorrow in the low 150s/high 140s.

Copper minnows in favour. Mon Oct 25

A flat night on Wall Street but some good strength in the Aussie market as the expected apocalypse still hasn't arrived and we're playing catch up.
The Xjo index is closing in on recent highs and this time (!) should get through.

In the copper sector, Equinox minerals has made a takeover bid for Citadel resources which has been well received with a 7% rise in Eqn shares. It has helped Pna to a nice little bounce today, up 6 now at 81.
Gold is up over USD 9 in the Asian session which is more significant than usual because it's the first response to the G20 meeting which didn't come up with anything stringent regarding the currency wars. Gold has also had a decent pullback so a normal sort of correction is plausible.

I was looking around for a long in order to trade a gold bounce. I've bought back into Avo but I'm using the 60 minute chart so will have to be alert to get in and out quickly. I got long at 308 with a 299 stop, anticipating a break above 310. I'm looking for a quick move to 330.

4.14 The Asx 200 index held most of the gains to finish with a rise of 62 points. Asian markets are firm and European and US overnight futures are also strong as the takeaway from the G20 is suggesting the QE trade is still on. Gold is up USD 11 and Avo went ok to finish at 320. I sold out a quarter of the position there.

My positions are strictly long and they all rose today as you'd expect in a strong market.

The index broke the range today with a high of 4725 and while it closed back within at 4710, it's still the best finish since April.

Small beer. Fri Oct 22

I'm still on the sidelines, by and large, as I wait for the market to show its hand. The overnight session was choppy, although still grinding up, while resources were weaker again. Gold stocks might have completed their correction, there's some minor weakness here and there but no serious selling. I'm hoping for some buying opportunities early next week.
I have bought a few shares at 74 in gold/copper stock, Pna, as it continues to pull back towards support which I think is at 70. If it weakens further, I plan to buy some more at 72 or 73.

Kzl, a zinc stock, is in a similar state to Pna and I'd also like to buy some there. But I'd have to pay about 74 now with a stop around 68 so the risk/reward doesn't quite stack up yet. Looking for 72ish there.

It's 10.50 am and the index is up by 6 points. I suspect we'll have a short covering rally this afternoon. We're all expecting the worst and although it's October, it still hasn't happened.

1.57 pm Not a lot of change, the Xjo index is a little firmer, up 12.
No action yet on Kzl. Bsl found support at 210 again and I've gone long some Awe at 150 as they've reversed after making a minor new low. A very tight stop at around 145 to make up for this being a bottom picking exercise.

4.10 We did get some late buying and the index finished up 25.

I bought some more Pna at 74 and it strengthened a touch after that to close at 75. More next week.

Still throwing dummies. Thu Oct 21

It was as you were last night with everything reversing. Fnarena's morning report is quite clear on a fairly murky situation.
The reaction in the first hour or so this morning has been quite muted with early gains largely gone. The Xjo chart looks ominous but is, nevertheless, above the breakdown level and in the middle of the trading range.

Ok. This is interesting. Blogger has updated its image uploads and I can no longer put charts here. It never occurred to me that inserting charts could be an issue because I know that the ASX provides price data free on a 15 minute delay. I pay, through my trading systems IRESS and Esignal, for live data and I suppose, now and then, there's information which may be slightly fresher than that but it seems trivial when you're looking at a market of thousands of stocks to worry about one or two random charts.
I'll look for a solution to the problem but until then, I'm a bit stuffed.

12.03 The market is up 15 points and I've made some progress with the uploading thing. It won't let me upload my own pictures and it's possibly something completely different to what I imagined.

2 pm This is a Bsl chart which has loaded correctly after some shenanigans. Advice I've had is that it should be sufficient to attribute the source of the charts which is IRESS.

 

I bought this earlier at 215 with a stop at around 204. It's near the bottom of the range with the sell down having lost momentum.

4.13 The market was unable to hold on to the gains and the Xjo finished down 2 points.
I feel strangely reluctant to put short positions on, although I have trimmed my longs to be quite minor. Even the new Bsl position is pretty small.
I guess my thought is that we're still in a trading range and that range is in the context of a firm market.
Also, the drawdown following on from some loose trading has made me want to just tighten everything up and wait till I feel in sync.

Who would have doubted it? Wed Oct 20

The prospect of some sort of appreciation of the Yuan helped the US dollar last night and the big unwind continued with the US market and the Australian dollar, gold, oil and base metals all hard hit.
The Xjo has made a sell signal with a break below last week's low of 4617 with the caveat that it is still in a trading range with the next support level being 4559. So it looks like the broadening top was the correct thesis and further weakness should follow.

I haven't covered myself in glory with my trading lately despite being very wary of this kind of top. It's one of those situations which is quite tricky to trade but still, it's not impossible.
My big trading error of the last week or so was to think that gold could go into a real acceleration phase when it was just about to make a short term peak. The gold stocks are pretty weak again, despite the gold price being pretty much unchanged in AUD terms.
I've sold out of Sbm at 39.5 and I'm looking to get out of Pru but Avo has gapped through one support to be sitting just above the next so I'll look for a rally to get out or use the next level as my stop.

11.30 I imagine that this is pretty common to experienced traders, but I've been feeling uneasy about my positions and my trading for a week or two and sure enough, I woke up in the middle of the night and spent an uncomfortable half an hour confirming that the start of the day's trading wasn't going to be too pleasant. By contrast, when I'm comfortable with my positions I hardly think of them outside trading hours and certainly don't wake up with a sinking feeling.

However, having gone back to bed and still quite sleepless, it occurred to me that since late March, when I made changes to my trade entries, I've enjoyed the most consistent period of trading I've had for some time. I haven't had a great deal of exposure to the market but have made about 12% return per month on my capital employed. The last few weeks, costing me a percent or two, has coincided with increasing doubts about how I should be trading and I've been tinkering with what was working quite well.

Obviously what works for me isn't what works for other personality types or trading styles but I've done two key things to mess things up.

Firstly, I've started chasing trades. My improved results stem from increased discipline about trade entry. ie I get into the trade at my level; if it's already broken out then much of the low risk gain is gone for me. In that situation, I'll wait for a retracement which would give me a second chance to enter at a good level.

Secondly, I've been declining to take profits along the way. For many, it makes logical sense to run positions for as long as possible because the big wins that you have will more than compensate for the times when you hand back profit. Despite figures which confirm that this is usually the case, this is not a technique that works for me. I prefer to keep banking part profits and on those occasions when I then have to stop out, I find it much easier to sell the remaining balance for close to breakeven as I've still got something to show for the trade.

12.12 The upshot is that I've been looking at the explosive charts, situations where I'm less likely to be able to get set, and trying to tailor my trading around that model. For example, here's a daily chart of Intrepid.

In the last weeks, this has gone ballistic and I've focussed on the missed opportunities. But looking back over my trades, I traded this 8 times in September for three really good trades, two reasonable ones and three scratch trades. There's no point trying to change my style to buy and hold based on a couple of stocks despite the human tendency to think "why didn't I just stay long the 40,000 stock I bought at 80 in late August" because there's been no sell signal since then.

My time frame is ideally two to five days to pick up anywhere from 3 to 10% depending on the type of stock. The idea is to constantly rotate my trading capital, looking for those sort of opportunities which fit my method and which tend to present themselves day in and day out rather than the recent examples in Intrepid, Lynas etc which are much more cyclical. And I want the losses to be in the range from 1 to 3% when the trades go against me from the start. In most cases, the trade will spend some time in neutral to positive territory and that will give me the chance to get out for around square when they fail to go my way.

I still target those fast moving stocks and if I can't get the trade entry on a daily basis, I'm not averse to using the same sort of pattern on a 60 minute chart but what I need to keep in mind is that my holding period is going to shorten to something like a half day to one and a half days.

2.33 The market has had quite a good bounce from early lows to be down 41 points. The golds are having an oversold rally and I've cut a few of the Avo at 295 and Pru at 274. This is a fair bit better than the early lows and I still have around half on board as there looks to be further short term strength.

4.26 Interestingly, the index rallied through to the close for a loss of 31 points.

Little dipper. Tue Oct 19

It's not quite a rollercoaster because the market is up 20 points after falling 37, but there's still plenty of indecision around. Last night US indices did pretty well, rising about three quarters of a percent, with commodities firmer and gold recovering from the losses in this time zone to finish up a few dollars. Subsequently, IBM and Apple are weaker in late trading after reporting good results; sell on fact.
Financials are still the outperformers and the gold sector is mixed despite the gold price recovery. The market heavyweight is Newcrest and that's slightly down on the day. It's quite near support and will provide a guide to the rest of the sector.
My opinion is that the a-b-c sell down from 4280 to 4055 is probably a wave 4 correction in the context  of the move which started in late September at 3909. If that's correct then I'd expect a bottom soon and a rally to about 4300 or so.

As for my gold holdings, Avo is continuing to sell down to just above the breakout level at 303. I've bought some more at 308. Pru has steadied and is up 4 while Sbm is unchanged.
Lnc has held support so far and it was interesting to read comments from the Adani chairman who is visiting Australia. His company bought the Galilee tenement and is fast tracking drilling. He's obviously keen to start mining asap and this may be the reason behind the recent strength in Linc. The analyst's report which I read was very conservative regarding the time frame for development of Galilee and had heavily backdated the start of royalties to Linc from the project. He was also working with some cautious production estimates.

2.37 The market is strengthening gradually but it's not racing away, just up 25. The gold stocks are still betwixt and between, holding support but not recovering much.
I'm trying to limit my trading now because while we're in this choppy range, I have very little conviction and from conversations with other traders, it seems as if they're finding it difficult too.
Once the market has made up its mind, it'll be much simpler and in the meantime I'll take it easy.

4.10 All over for the day and the tone of the market is apparent in the way that we sold off to be up just 4 points because US overnight futures are weaker as mentioned earlier. So, we discount the rise which we hadn't built in and fully account for a potential move when the overnight futures are not a great predictor of what actually happens in the US, more a reflection of what's happening in Asia.
It is what it is and it's sour grapes on my part to complain about it because I'm long, despite not being especially bullish.

Still in limbo. Mon Oct 18

The prospect of a broadening top having formed is still at the forefront of possibilities. After the AUD hit parity with the USD briefly on Friday night, it seems like some profit taking or perhaps shorting of risk assets has taken hold of the market. Gold fell about 1% on Friday and in the local session it fell a further USD 11 to 1357 before finding some support and bouncing back to 1361.
The profit taking that has hit the gold sector has continued and two of my three holdings, Avo and Pru, are well down while Sbm is steady but took its medicine in the last session. I was lunching with a friend on Friday and we discussed the possibility of gold getting crunched and then reversing course to soar back up. It could be wishful thinking, but it was in the context of gold having reached the explosive stage of a rally where that sort of thing is quite common. It means that you have to hold on for the ride I guess, since stops have to be wider, and perhaps reduce position size. Here's the Spot Gold chart. So far today, we've held above short term support at the breakout level of 1355.

The chickens are coming home to roost for me today because I've taken hits on Mbn and Mmx which are two positions which weren't really happening for me and which I could have stopped out of late last week.
It was the usual issue of being vague and unclear.
For Mbn, I'm using 172 which is fine I suppose but I was trying to buy a fast moving vehicle and I really had plenty of time to get out once it was hovering in that little range around 180. What I'm saying is that technically, it's fine, but in reality the stop at 172 is more of a worst case stop and I usually try to use my intuition so that if the stock isn't behaving as expected then I'll just get out. When I start to rely on my stop, it usually means that I'm not willing to accept that I'm wrong and it just adds to the damage. The stock is actually at 171.5 but is steadying so I'm hoping to get out at 173, 174.

Murchison is one I should have chopped last Thursday. I was essentially buying support and it failed to hold. It's been underperforming for ages and is probably due to turn but there's no catalyst now and I'd be wiser to take a clear breakout like the one in early September. Buying potential support is much more sensible when you're going with a clear trend rather than a potential turnaround. I'll have to bite the bullet on this one too.

It's not all doom and gloom though, I'm essentially happy with my gold positions despite them being sold off today. While I can see that there's the possibility of having to chop them if they fail to hold support, it's not the Mbn situation where I feel that I should be getting out before then. My other two positions in Kzl and Lnc are also tracking quite well despite being a little flat to down and again, they show potential for further gains even though they may pull back for a day or two.

Here's the Avoca resources daily chart and the stock today is still well above the breakout level of 303ish.

1.23 Chinese markets are weak today and the Australian market is following the Hang Seng and Shanghai markets down. The Xjo index is down 38 points but it's still in an awkward spot where it's unclear whether we've made a lower high or not. Here's a 60 minute chart.

It's still possible that this is a retracement of last Thursday's 70 point rally although it will need to find a floor soon.

Anyway, I'm out of Mbn at 172.5 and 173 and Mmx at 147.5 and 147. I'm comfortable enough with the rest of my positions.

2.25 Just looking at CNBC, I realise that the Shanghai market is slightly up, it's Shenzhen that's down. However, the Hang Seng and Kospi are both lower by about 1%.

Gee, it's been tricky the last few weeks. Expanding tops (or potential ones) are like that. I actually had quite a good week, last week, but at this point I've given back all of that profit by Monday afternoon. The Xjo index is only down 41 points but the speccy end of the top 200 is much harder hit.

3.24 Just sold out of Kagara at 76 as there's a sell signal on the 60 minute chart and it's too much of a gap down to the breakout. ie I think there's a fairly good chance it could get down to, say, 72.

This is turning out to be a nasty day for me, easily the worst this financial year which is strange when the market is down just 1%.

For example, a month ago, the first little correction in Kzl from 82 to 77 would probably have provided enough of a pause before further strength but now, even a strong chart like this one, is having more of a deep correction.

3.48 Technically, Perseus is a cut for me, having broken the last swing low at 280 but I'm inclined to leave it overnight because it's regaining that level and physical gold is only down 7 or 8 dollars now. Every man, woman and child with an interest in investment is long gold now so I've got to expect some pretty whippy action. In this case, I probably should have been panicking early and since I can't do that now, I'll give it a chance to chop back up.

Since this is a catalogue of woe today, I may as well add Linc which was firmer early, despite saying they had no explanation for Friday's rise when responding to a please explain from the Stock Exchange. That strength didn't last and now they're down 17 to 188. Fortunately, I sold a few at 208.

They're still holding ok but the mood in the market is pretty unforgiving.

4.13 That's that then. The Xjo closes down 37 points, really a pretty normal day, and even my watch list is not that bad, it's just been a perfect storm for me of big reversals in a few stocks.

I suppose my book reflects a fair bit of caution though, long 3 gold stocks which are sort of defensive - at least, in theory - and Linc, which is a stock backed by a fair amount of cash in the bank with attractive assets close to being sold.

Broadening top, still lingering. Fri Oct 15

The prospect of a broadening top is still lingering as the Asx 200 finds it really hard to get through 4700. US stocks made a late recovery to close unchanged while European stocks and commodities were a tad weaker. The reaction this morning has followed the pattern of the last week which is to lack a sense of proportion. The index was down about 39 points and has recovered to be 31 points lower.
Gold was up again but most of the gains had already come through in yesterday's Asian trading session and most gold stocks are lower this morning.
I've taken a couple of little hits but I'm sitting with my existing longs for now.

12.23 I'm just watching the market uneasily without doing much. The Xjo has recovered to a loss of 20 points. I'm just going to insert a snapshot of the 60 minute chart. It looks like it has found support short term and maybe there's another tilt at 4700 on the cards but the market is getting harder and harder to trade and I'm looking for opportunities to get out of anything that's not performing as hoped.

2.10 The index has clawed its way back to down 12.

Linc is starting to reward my patience, up 4 at 187 and it has made a minor buy signal as it broke above last week's 186 high. Resistance is at 193 and then 199 which is where it peaked before. The chart has been adjusted because the dividend was classed as a return of capital but it seems like a grey area here. Anyway, if it takes off then the move could be a large one and 199 would be a minor irritant.

2.18 I seem to have magicked Linc up to 193 in a rush. It must be the power of my readership of 3. I talked myself into buying more and picked them up at 189. They're at 192 now and the Xjo is just down 3 points.

3.11 14 of the 17 stocks in the Asx 300 gold index are down today but Avoca is one of the three that's up. Sold a few at 323 earlier, they're up 8 to 326 now.

3.53 It's not news that Linc is in the process of selling the remaining coal tenements and I assume that negotiations must be advanced because the stock has really taken off. Once it got through 199, it quickly spiked to 220 and has settled back at 204. I've just got a weekly chart up to see what levels this rally might reach. Last year's high was 253 (adjusted again, I presume) and in 2008 the 250 level was also quite significant as support so that's the first guesstimate.

I'm trying to remember what the DCF valuation was for Linc after the cash received and income stream from the sale of Galilee was tallied. I think it was about 150 and with shares on issue of 500 million, it's quite possible that a reasonable price - they're talking North of AUD 500 m - for the remaining properties can kick the cash value of the stock up to 250 so that the core business is a free option.

4.10 Asian markets are generally a little weaker although Shanghai is strong again. We've just closed down but only mildly weaker with a loss of 10 points. Linc held the break to close at 205.

Sputnik. Thu Oct 14

Gold has been running since late July and shows no sign of slowing. It looks pretty explosive as if we're entering one of those feeding frenzy periods. Here's a weekly chart of spot gold.

I was out of my small long in Mml and just holding St Barbara. They're back up to 43.5 and doing well but they're not the most exciting stock in the sector. Fortunately, a couple of gold stocks I've been following have had decent corrections and I've bought on the open. In both cases, even though I'm chasing a small breakout, it's in the context of a correction and not at the top of the range so I feel quite comfortable about the trades.
The first one is in Avoca resources. This is a good opportunity because they announced a merger of equals in early September with Canadian listed company Anatolia. It stopped momentum in its tracks and the stock has seriously underperformed the sector since then. I've been itching to buy this for about a week but the pullback was pretty deep and I was concerned that maybe it had just been shoved off the radar. I went long this morning at 306 and 309 for a 307.5 average and now that it has passed a minor swing low at 310, I'm fairly comfortable that it will get back to, say, 350.
In investment terms, the voting on the merger isn't due till mid December so there's time for a bid for Avoca and even if the merger goes through, the merged entity would be a mid cap gold stock in a time when there are few around following the takeover of Lihir. Again, this seems a reasonable prospect.
Here's the daily.

The other gold stock I've bought is Perseus at 303. It's the first time I've traded this but I've been watching the stocks in the Asx 300 gold index and this seems liquid enough and interesting enough to be able to trade. Pru is due to start mining in Africa in FY11. The only forecast I've seen is for a prospective p/e of about 11 in FY12 but with the gold price and the AUD flying around, I assume that's pretty vague. The interest in Perseus is probably centred on its strong reserves with figures liable to be upgraded over time.

I really could have got in earlier here but it's still comfortably below the recent 336 high and has made a nice buy signal.

Overall, the market is up 55 points with the prospect of more strength, I think, because the Dow Jones, S&P 500, FTSE 100, CAC 40, DAX, Hang Seng Index and the Shanghai market are all trading cleanly higher while the Australian market still struggles to get through recent highs. Japanese and Korean markets are lagging but they're probably special cases as exporters with currency problems. We share the problem of a strong currency but resource prices more than compensate.

Kzl has continued its breakout after the late rally yesterday and is up a further 4 cents to 79.

12.14 Kzl is at 81 now, having been as high as 82. I'm trying to work out how many, if any, I should sell and where I think it can go in the short term. There was a congestion between late January and late April and the stock spent most of its time between 81 and 90 before eventually failing. I'm assuming that the top of this band might provide a short term limit because even though I'm assuming we're entering a third wave (third of a third, to be esoteric) move, it's already covered about the same ground as the first wave and the usual guesstimate of 1.6 times would roughly take it to 90.

The backdrop is that explosive moves are becoming common and it may be wise to allow room for that. Other factors are my psychology and trading habits which tend to the conservative side.

What I've done so far is sell 10k at 80, having bought 70k at 68, because I want the psychological boost of having put some profit in the bank. This generally frees up my trading but I do have to then watch out that I don't start dumping the rest for no particular reason, having released the pressure.

In relation to the above, the earnings context is for 7 cents this financial year and 10 in FY12 so that the prospective p/e ratings are not onerous. This is based on two analyst reports tracked by FnArena so it's not a big sample. Also, the most recent update was in late August and zinc has outperformed the AUD since then.

3.04 I've been concerned that the market is making a broadening top, which is the sort of action which can give you whiplash. Here's the Xjo recently.

Standard charting techniques would have these break to the downside but I think with other markets having broken out quite cleanly, it's not such a worry.

Here's the S&P 500 for example.

3.48 I was just looking at a weekly of the Xjo, trying to project targets for the rally if it clears this resistance. I notice that there's a nice example of an expanding top leading up to the April peak. 

As for the situation now, it looks to me like support held, we had a higher low and now the index can accelerate through to next year.

4.13 The Asx 200 index closed at 4699.1, up 79, which is a closing high for the last 4 or 5 months even if still below the intraday high from Monday.

Most of my stocks did ok, Avo kept running to close at 318 while Pru chopped back a couple of cents to 301 but held onto a 6 cent gain for the day. Gold is up a further $7 in the Asian session.

No quick fix. Wed Oct 13

Approaching the end of the first hour of trading, we've had the knee jerk bounce but it's not terribly convincing despite the market being up 28 points.
I was hoping to get out of a couple of awkward trades on the rally but not necessarily expecting too much as it seems that yesterday's big fall out of the blue has shaken the confidence/overconfidence that was building.
Minara has released a mildly disappointing quarterly result and has sold off a couple of cents. It made a new high on Monday and Tuesday but couldn't push on. My stop is around 78 so this is getting close now.

11.39 Minara cracked and I had to stop out, dealing at 77 and 78. Most were bought at 82 but I bought a few at 84 too. It's got me thinking about the sort of trades I should be doing. I've been toying with taking more breakouts as the market starts to move out of the trading range and certain stocks are running, but this Mre trade was actually the sort of trade which I really dislike. I bought an extended situation on the hope of an increase in momentum. If I am going to do a few high momentum trades then it's much better to just watch the ones which are already in that phase and then look for good entries.

The market overall is just up 9 points now.

In the meantime, old habits proved to be sensible in Mml. A couple of days ago, I sold out half of my long on a minor new high. Yesterday was a retracement, but an inside day. The low of the breakout day has now been breached, so I need to sell out of the last of these.

1.34 I've got a trade on in nickel stock Mirabela which is an interesting situation. The stock had a very long sell down as the market was well aware that they needed to raise capital. The raising was largely completed in late September with only the the placement to small shareholders acting as a handbrake because any stock not taken up at the price of 160 could depress the price further as the subunderwriter would be left with this surplus. Mbn was drawn to that 160 price and made what looked like a 5th wave low in early October. A rally, maybe a squeeze, helped it to surge up to 192 and it hasn't returned to the lows. I bought some at 173 as it sold back down and I've added some at 179 today. A couple of analysts think it's artificially low and chartwise, I like the possibility of another spike up as there is no longer the same reason for it to be the short leg in a long/short trade.

The 60 minute chart is also quite promising. The consolidation after the spike to 192 has held above the breakout level around 172.

4.03 Just waiting for the match out and I'm feeling better about my positions now I've cleared out a couple of positions I was uncomfortable with, despite Mre recovering a little to be trading around 80. Kagara Zinc took off about an hour ago, I'm not sure if there's a catalyst, but it has just traded as high as 75, which is through two recent highs. It's salvaged a winning day for me after a loss on Mre. My other positions are generally a tad firmer as well. I sold the last of the Mml earlier at 535.5.

Anyway, here's the amended Kzl chart. At this point, it's going to match at 75.

The market overall has been lacklustre and is only up 8, looking vulnerable to a little more selling tomorrow.

4.11 Ok, the match wasn't that great, cutting the gain to 2 points. Here's a chart of the Xjo on a 30 minute view. It looks ominous in the short term.