Gold to run? Thu May 7

The US market rallied again and took most commodities with it along with the Australian dollar, a commodity related currency. Gold started to move, in a much more modest fashion, but the spot gold charts are starting to look promising and I've put on a position in Lihir Gold, buying at 300. The context for this is that lgl ran from 152 in late October to 364 by late February. The correction, to my eye, looks like it completed with a choppy 3 wave move down to the low in mid April. Since then there's been a move up breaking the previous swing high just above 300 and a small pullback. If the stock can push through 302 then I see it accelerating towards 340 quite rapidly. I'd add to my position on a trade of 303 but since this can gap overnight I'd prefer to buy some now as I don't see a lot of downside.

12.22 I sold out about half of my sun position at 630, 638 and 640 (v 602) as it got close to recent highs. I've got about a third of my position left. Qbe has rallied 3% which is better than the market. I noticed that when I wrote about this yesterday I didn't feel super confident but once again I'm moving it back to the bottom drawer as a minor "work out" position rather than sell out as the options are June expiry and will only lose slowly if nothing happens. My feeling is that the markets are due a sharp retracement and that even though concern about the stress tests has faded the actual announcement might be a "sell on fact" trigger; qbe is my insurance policy as otherwise I'll just be long.

Another new position is Incitec Pivot, ipl, who are in the fertiliser business and report next Monday. They've had a capital raising, reduced their dividend forecasts and had the CEO resign recently but now that the dust has settled I notice that there is a growing perception that the worst has happened. At least according to the broker analyst's summaries I've read on http://www.fnarena.com/ (a very good local research site). I'm interested in the brokers' opinions but my reason for buying is the daily chart.

Although the stock is still in a trading range, it just had a surge to the top. Unlike the last surge in March, the third day is not a continuation of the sell off, the stock is up a solid 6%. A breakout could be explosive after such a long range and the results would be a reasonable catalyst. Long at 231.

Also sold out of llc at 750 (v 731) fairly soon after the opening as the stock is too illiquid at present and limits position size.

2.41 Out of the last of the Suncorp at 636 (v 602). Still like this, will keep watch for another opportunity.

I've started to build into a position in Link energy, lnc, as it has pushed up today after 5 days grinding down from a strong rally.

4.15 The market finished in good shape, up 72 points. Essentially, I have 3 long positions in ipl, lgl and lnc with a few out of the money puts. Sold a few ipl on the close at 239.

Good bank, bad bank. Wed May 6

The Aussie market is down 18 points at midday as the market pauses ahead of the results of the US stress tests of their banking system with the suggestion that as many as 10 of 19 are to be required to top up their capital base. While the UK played catch up with a big rise after having their May day holiday, the US was treading water.

Lyc continued to surge on the open and once momentum stopped I got out at 52 and 52.5 (v 44) as so often the morning sees a temporary high. Pan, my part position, pushed through to new highs but unconvincingly so I sold out at 179 (v 173). I added to my position in mig at 142 but then sold the additional stock out at 144.

The new position I took was to buy Suncorp. They've had their own internal stress test and decided to separate themselves into a good bank and a bad bank. The object of the bad bank is to create a vehicle to run down troubled assets and to make the retail and agribusiness parts of the company more attractive to potential buyers.

In a similar fashion to mig, there's been a slow retracement from a high in late March/early April and given that the market is probably very short this stock I jumped in on a strong 60 minute chart and paid 602. It's slipped back now as the market accelerates down, 15 points in the last 7 minutes, and is trading at 597. Here's the daily.

The 60 minute chart shows the break above a recent high of 600 so I hope there's short term strength ahead.

12.12 The market is now down 35 points and as qbe slipped through yesterday's low I bought a few more June 21 puts at 96, to take this into a full position. I'm hoping for a move back into the 2000-2100 range. 1.28 The market has stabilised to be down 21 points but I'm a little cautious and have cut the rest of my mig at 142 (v 139.5). The stock had the opening surge I was looking for but there hasn't been much follow through buying. Just long sun and short qbe right now.

3.20 I've scanned through quite a few stocks today and one I keep coming back to is Lend Lease, an international property development group with code llc. The weekly chart has congested bullishly.

The daily chart has held well over the last 5 days with a recent high of 735. I've now bought a few at 731.
I'm looking for a break of the recent highs and an acceleration towards 800 in the next few days. The only problem with this stock is that it's become illiquid in recent years so I'll reduce my final position size in this. Turnover today is less than 300k despite it being a top 50 stock and a famous name in the local market.

4.14 The market closed down 23 points with qbe hovering above 2155 support at 2169. Sun ran in the afternoon and I sold a few on the close to cover costs at 610 (v 602). Llc had a buyer on the close which pushed a thin market up. I sold a few at 739 (v 731) but I'm reasonably happy that the first level of 735 has been broken.
Of the stocks I sold, lyc and pan went nowhere while mig firmed up to close on its highs. I thought about buying back in but was comfortable enough to have moved into llc and sun.

Take a deep breath and count to 10. Tue May 5

After the buying panic yesterday in Australia and especially in China, the US rallied strongly as well. We carried on first thing to be up 60 points but fell back to square quite rapidly. It's 10 to 1 and we're now up 13 points.

The main winner is the energy sector while the leaders outside that area are pretty flat. I've continued tidying up. I sold the balance of my puts in anz for 91 (v 166) and bhp for 71 (v 133). Csl was weak and because I'd slightly overhedged the fall left me short. I took the opportunity to unwind, selling out my June 3300 calls for 200 (v 192) and buying back the same amount of stock at 3345 for a further 75 c gain adding up to a windfall profit. Tcl is back down and I've reallocated the position to neutral (lottery ticket in the bottom drawer) and the same with wpl which has rallied further with the energy sector. Qbe is down and looks weak - for the moment it's not significant but another day of weakness could mean it becomes a bona fide position. I've been legging out of my mqg spread, I sold it a few times at 30 compared to a value of 15/20 but it's small potatoes really.

I sold out my two genuine long positions soon after the opening. Kzl at 125 (v 90) and srl at 177 (v 163). At that point I was left with my minor positions and nothing else. So I ran through the top 50 and the materials and energy sub indices for the top 200. I found a few to watch fairly predictably in the resources sector. These are ago, lyc and pan. I'm also looking at mig - toll roads.

So far, I've bought Lynas Corporation, lyc, at 44. Lynas is a rare earths producer. These are going to be in great demand for batteries for electric cars. China actually produces a lot of its own rare earths and Lynas had been struggling for finance. Last Friday China Nonferrous took a 52% majority stake at 36 c and agreed to provide additional funding. This lifeline will enable Lynas to complete their Rare Earths Project. The stock gapped up on the news and consolidated for a day or two. I'm looking for another acceleration up. Here's the 60 minute chart.

The weekly chart suggest that if we get through November's high of 50 then the next resistance level would be September's low of 60.

2.48 Very little is happening as the market chops around. I've nibbled at pan and bought some stock at 172.5 but it's drifted back a touch. The weekly, below, shows that the stock is very near to recent highs and a break out. I'm trying to fine tune my entry as the breakout level is 177.5.3.08 Jobbed some wpl stock to cover part of the day's loss on the residual puts.

4.00 Added to pan to average 173 but still only bought about half of my target quantity. Slightly surprisingly, given some weakness into 4pm, mig has held up and I've bought ahead of the 4.10pm match out at 139.5. The daily chart shows a buy signal triggered today after a shallow correction from the high in late March. The 30 minute chart shows the stock gapping up today and then having a bullish correction intraday where the second attempt at a sell off was weaker than the first. I've bought on confirmation of that strength and I'm looking for a quick run up to March's highs above 150.

4.11 The match out was a bit soft and the xjo finished with a gain of 7 points. I'm left with longs in lyc (sold a few at 47.5 v 44) and mig. I hedged a bit with pan as the close was unconvincing and sold out some at 173, my entry price. Hopefully, it will trade through 177 tomorrow so I can buy more, rather than gap through. It may need a more extensive correction first.

The value of my option positions is negligible now except in qbe where the stock finished on its lows and could give me a windfall in the next day or so. A pretty good day overall and I'm happy to have a focussed book.

May the Force be with you! Mon May 4

It's a very forceful day on the Australian market today with the xjo having made a new high this morning despite only a modestly bullish lead from the US. I went home Friday pretty uneasy with my positions and my gut has proved correct as my put positions have mostly dwindled away. One of the worst has been in wpl where the traders' prerogative to change my mind has proven expensive. Still, my smaller cap positions have performed pretty well and taken most of the sting out of things.
I was reading a self-help book over the weekend and one of the points which I found interesting was to ask yourself what you really like about your work. My answer is that I really like to have a few very focussed positions, to pick a short term move and to get out. As it happened, at the close of trading on Friday I had positions in 13 different stocks whereas my ideal would be 3. Admittedly, mqg was a small left over spread but that still left 12.
Just after April option expiry I reduced my book to 3 positions and that kicked off a good little run only for the portfolio to get bloated again, since when I've given back some of the gains. With that in mind I sold out of ago at 138 (v 134) and riv at 489 (v 466). I added to kzl at 99.5 (and sold a few of those at 104.5) and I sold a few srl at 172.5 (v 163). I decided that csl had had its run for the moment and hedged my option position near the low of the day at 3420.
That leaves me with longs in kzl, ozl and srl which feels about right as there are few obvious sell signals now. In the neutral basket - essentially just old positions with little risk that I can ignore - I've now got csl, mqg and tcl. Tcl because the position is just a few cheap June 450 options.
The short positions - all puts - are my problem. I'm inclined to close them out, or in the case of wpl, to go long but I was waiting and hoping for a pullback which hasn't happened. Given the element of squeeze today it's probably unlikely to happen and I'm going to need to bite the bullet at some point. In the case of qbe which has rallied another 4% today, I'm so wrong that I may as well keep the positions which won't do much more damage.

1.03 I'm out of ozl now at 79.5 (v 74.5) as it fails to kick on.

3.30 Kzl is up on its highs now. I sold some of the extra stock I bought near the open but will leave the rest overnight as there's a good chance of another kick. Here's the daily.

3.54 I bought back the srl I'd sold at 174, including a touch more stock, as it's had a bullish correction and could gap up again tomorrow. Here's the 30 minute.
I sold out half the anz puts at 115 (v 166) and half the bhp puts at 92 (v 133). I cut the rio puts at 220 (v 333) and have left wpl as the puts are trading at 47 with a month to run. I'm confident that the stock looks good now but there's half a chance there'll be a pull back in the next day or so. I'd like to buy stock and keep the puts as cover.

4.18 Probably should have completed selling puts in anz and bhp but the market ran away again to close on its highs. I'm left with longs in kzl and srl and a half position in tcl which ran enough to make the june calls a bit more meaningful. I have a few small put positions left in anz, bhp and wpl. I'm now bullish all 3 of these and didn't act quickly enough to dump the puts early. With the market up 3%, most of Europe closed and accordingly the US likely to be thin; there is a chance of a retracement. Otherwise, csl and mqg are neutral and qbe is pretty much out of the picture for now.
I'm glad to have tidied up today and want to keep things focussed from now on. Thanks to kzl - up 28 or 31% - I was nearly breakeven today.

A bob each way. Fri May 1

Yesterday's blog finished abruptly as a friend visited and before I knew it the market was closing. It closed strongly up over 2% and has continued to do well today as we're only down 14 points despite a strong overnight US futures market during yesterday's trading having given us a lead which the actual US indices failed to deliver. In addition mqg has announced a capital raising along with a slightly better than expected result which might have put a dampener on the finance sector.
It was the last day of April and my trading day went better than the open might have suggested as I cut my shorts early and a few trading longs in mqg and wpl went ok. This morning ozl is the big winner, up 4 at 78.5. I sold a few at 77.5. Csl was also firm early although it has faded a bit now. I added a few may 3600 calls at 57 to my existing june 3300 call position as the trend looks strong.

I've been through quite a few charts today, from the top 50 through to smaller stocks in the resources and energy sectors. What stands out is that the overall index and many of the top 50 stocks have no momentum and are still chopping around below their recent highs while the smaller stocks are looking far more promising. A lot of them ran into mid April and had sharp pull backs but now are running again. Apart from some minor takeover activity, it appears that the strength in the sector is being driven by an increased confidence that demand growth or at least consolidation, is real.

You could pretty much throw a dart and find a reasonable buy but I'm trying to cherry pick the stocks which might be right to move now. I've come up with 3 of them. Atlas Iron, ago, is in iron ore; Riversdale Mining, riv, in coal; and Strait Resources, srl, in coal and gold/copper.

Here's the weekly for ago. There was a long consolidation from mid January then another run in April. It looks ready to make new highs after the small consolidation.

Moving to the daily scale, there was a text book correction from the run up to 145 and now things are moving again. I've bought some at 134. It's possible that there'll be a pullback to make a higher low than 127 from Wednesday and then I'd look for acceleration.Riv is a breakout trade and I've only put on a small position as I'm tentative about chasing this early on a Friday. However, the coal sector has been volatile recently and moves have been large. I'm long at 464.

Of the 3, I'm most enthusiastic about srl. I'm not exactly sure why, but it's got a shape which implies acceleration to me. There's plenty of volume going through and I'm just building in to a position having paid an average of 162.5.

There's another one I like, Kagara Zinc or kzl, which is down sharply today but looks promising overall. Weekly and daily follow.

I think the correction was complete earlier this week, that yesterday was the start of a new leg up and that today is just a partial retracement of Thursday's rally. I want to see some sort of sign that this thesis is correct so I'll look for any clues on intraday charts as to whether the pull back is over.

1. 30 The each way bet I've had is to put on some day trades in a few of the larger stocks. I've gone short anz, bhp and wpl. They haven't really moved yet - I don't think they're standout trades but there'll all stocks that are consolidating weakly below recent highs and given that it's a Friday they could get sold down as the afternoon rolls on.

I bought some more riv at 468 as they're pressing on and just got some more srl at 163.5 before they popped up a few cents to 166.5.

2.22 I actually closed out my short in wpl at 3865 (v 3849) as it's pushing the top of the range and serious resistance at 3880. As mentioned in previous posts, I'm confused about wpl and should stay away till I have a clearer idea.

Just bought some kzl at 90 on a 30 minute buy signal. Fairly flimsy but I like the big picture and want to make a start.3.02 A trader's prerogative is to change his/her mind. I promptly went and bought may 3800 puts in wpl at 105 as it failed to make it through 3880 resistance and started to reverse. I also bought some qbe june 2100 puts at 82. I could be throwing good money after bad but the stock is reversing and is still short of key resistance at 2240.

3.58 Decided to stay with my earlier shorts in anz and bhp overnight. I've also added a tiny short in rio. It's speculative as the daily and weekly charts are fine, I'm just looking at a potential lower high on the 30 minute chart and a quick swing down - for a one or two day trade.

4.16 The market held quite well into the 4.10 match although the spi is softening now. Ago and kzl held at my entry levels, riv is thin and chopped up and down finishing at 463, while srl sold off but rallied again to close at 164.5. Of the larger cap stocks, the ones that had been strongest early like csl, qbe and wpl sold off towards the close while anz, bhp and rio rallied slightly.

Overall I'm quite happy with the week. I made a few dollars despite the market chopping towards the top a range where I was looking for a failure and a sell off. I've reinstated my short bias in the larger cap stocks as it seemed like a good opportunity with a market reluctant to fall after yesterdays run. Here's the xjo for the week. Lots of indecision.