Tuesday, 30 September 2014

Quindell RSI divergence gone

Quindell (£QPP) continues to fall. It is not crashing and burning, and the controversial Shareprophets theory appears to be stalled.

I posted a few weeks ago that bulls could take comfort from a clear RSI divergence pattern, but unfortunately, in the last few days, this has disappeared. The only hopeful signal for a bull is that this morning, the instrument briefly entered oversold territory.

This also co-incided with the bottom of the downward channel, but more importantly, with the last but one line of support from June 2013 of 137.69p. You can see that this was the last of a series of gentle reversals, and I do expect this one to be breached.

£QPP - negative divergence over

Indeed at 8.20am BST today, the share briefly touched 137.87p but quickly bounced back. This was the quick entry into oversold territory, plus support, and the bounceback was definitive as you can see from the 5m chart.

£QPP bounce - clearly algorithmic

You can see from the first chart that recovery in the downward channel suggests the share may now climb back to as high as 190p, before a further fall to 137.69p or lower. If it does go lower, there is clearly much more resistance, and the ultra-low of 81.15p was only for one day (10 May 2013), so my view is that it's not really going to go sub-100p. Still pessimistic from it's current price, but there you go. Going long to get that 45p to 190p should be regarded strictly as a day or swing trade, not a position. I would do a spread-bet and set a limit sell of 185p.

Note that a bounce back to 190p will not restore the negative divergence, and there is no technical reason at all for the share to go higher than that. Only something fundamental could do that.

In the long-term, I will repeat what I said before. These Shareprophets and Gotham City Research allegations need to be proved or disproved. If disproved, happy days, it's a £6 stock again, but at the moment the slow slide (reminiscent of £GKP's chart) suggests that institutional buyers have lost interest.

Don't forget £QPP is still the most shorted stock in the UK, as can be seen here on the very useful Datalend website. Check the recent price/action on the other highly shorted stocks on the list.

One thing is for sure, £QPP may still be a 'hold' but it definitely isn't a 'buy' at current prices. Anything is a hold if your timeframe is long enough.

One last thing, as I am sure you know, Quindell did a 1:15 reverse share split on 19th June (RNS here) and IG Markets correctly adjusted their chart to reflect this. However, Spreadex did not, and I have written to them today about this. They did adjust their chart for £RBS who did a 1:10 split in 2012, so I assume this was an oversight. But whilst on this topic, the mighty Google Finance have also not entered the split in their chart. I have written to them as well.

For those of you not familiar, when Quindell was split 1:15 on June 20th, every 15 of your Quindell shares were converted into one new share. Obviously the value of these shares therefore went up by a factor of 15. QPP shares closed at 16.65p on June 19th, at 242.68p on the next day. It is normal for charting services to show the prices prior to the split on the new basis, otherwise you would have a massive gap, which Spreadex and Google Finance do have!

Rare mistake by God!
PS Before you ask, yes I am short £TSCO, TP 158p


  1. Hi

    IMO, QPP is a highly manipulated stock and I would rather stick to volume analysis (PVT, OBV...) than purely on chart paterns or/and oscillators.

  2. I have read this article and wanted to understand more about the RSI Divergence. To be honest it is not a very easy trading concept. I did some googling and found the explanation on https://www.100-eyes.com/education/divergence-trading to be quite nice!


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