Getting frothy. Mon Oct 11

US jobs numbers were poor which meant that everything rallied anyway on the promise of more quantitative easing. It was as you were with gold and base metals rebounding and the Australian market has started the day positively with a rise of 28 points in the Xjo 200 index at 10.38 am.
The game has definitely changed in the last month and things are starting to get frothy. The usual suspects of Lynas and the golds are still running strongly while Fortescue has definitely joined the party (up another 5%) and even dowdy old Alumina has hitched up its skirts and is giving the others a run for their money.

My success story for the day is Medusa which has bounced back to 560 and is also ex dividend 5 cents for a little bonus. The high last Thursday was 565.

I sold the last of the Pna at 76 and 77 today and they're now up to 77.5. I've tried to look for more than just a modest new high, given the change in tone, but I'm probably still a little too cautious in my profit objectives. Still, these were bought about a week ago around 67, 67.5 as the stock paused so it's been a nice trade and there are plenty of these sort of trades popping up now.

10.53 St Barbara is up with the rest of the gold sector but is still quite subdued and is a good illustration of the sort of decisions that crop up even with a trade that's going well.

Looking back, my last trade in these had been a buy in late August at 31 followed by sales at 35 and 36 on the first two days of September. I'd obviously been concerned about a double top because the retracement had overlapped previous swing highs. In retrospect, the run up from early May to mid June was probably wave 1 so that the pullback into early August was a typical sort of wave 2. If I'd realised that, or at least been working with that scenario, then I wouldn't have been selling when I did, I would have been looking for the sort of acceleration which did eventuate.

Looking at my recent buying at 39, it was reasonable to expect a fairly shallow, bullish pullback after that acceleration which took the stock to 45. I can give a tick to the buying then, but it's still one of those trades where there's not much room for error because support is way down at the August low of 28. I used 35.5, which was an interim pivot, as a likely place for minor support to occur and fortunately the stock went my way quickly.

Up until recently, I would have been looking to sell out half of my long at around 43, ie somewhere just short of the recent high while keeping the rest back in case of a better move. I didn't do that and felt a bit stupid when I watched the stock retrace on Friday. I still feel uneasy because it's a nice way to manage risk but I do recognise that as stocks start to race, I need to lengthen the reins and let my positions run further.

I'm still looking at the chart thinking that it could slip back to 39 or 40 and then have another tilt at the highs but I think that this sort of fine tuning is going to be unproductive in the stocks that are moving into bull markets - even if in this case I might have done slightly better.

2.07 Since I'm already quite long the market I haven't really done anything new today. I have added to a couple of existing positions though, having sold out the Pna (too cheap, trading at 80 a few minutes ago). One of them is Mre where I added a few at 84. These made a marginal new high at 84.5 and look ready to push harder. They're a good example of where the market is at. Since May, the optimal strategy has been to try to pick buyable retracements because it has been gently trending up. You also didn't want to get too greedy for the same reason. If it shapes up like other materials stocks, it could start to gain momentum with the action since May serving as a launching pad.

4.11 Mml closed up at new highs at 567. I sold out half - old habits die hard. Meanwhile, the index traded through last week's high of 4698 but closed just below it at 4697.5. It was a muted day in the top 20 stocks but the small to medium resources were generally strong.

I'm hopeful about my long in Kagara Zinc. It just had its higher trade and close for a few weeks. Key short term resistance is a bit higher at around 74.