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

Monday 22 September 2014

Plus 500 hits support

CFD broker Plus 500 (£PLUS) shares, which I wrote about in August, have plummeted over 12% this morning, ostensibly on a report that they are not vetting clients on signup, only on withdrawal, which is in breach of FCA anti-money laundering regulations.

The report in in The Times. You can click here, but you might be frustrated by the paywall.

Anyway, the shares hit strong technical support at around 360p and then bounced back from there.

£PLUS hits 360p support

I have been short since 480p (see the earlier article), and still believe that the share could go a lot lower. However, I noticed that volume in this huge drop was completely unlike the 24th June drop, and even less than the 14th July drop. Although the full day's volume is not in, the volume which caused the drop is in, and it is, at the time of writing is only 170k shares, compared to 1.3M on 24th June.

Also I notice that the 14th July drop, was followed the next day by a massive buy volume. The price didn't move straight away, but that day was clearly the kick-start to price recovery (well certainly a B-C move).

Given the events of 15th July, and the 360p support line, I have decided to close my short today for 105p gain. I will be very carefully watching tomorrow's volume, and making a decision based on that. Most of the losses today were in the first few seconds of live trading, but there is a small overnight gap around 420p.

I expect a short-term but very fast retracing rise tomorrow, but I am particularly interested in the volume, to see if the 15th July pattern is repeated. Alternatively, if the share falls below 360p on volume (or for more than a day or two), I will short there.

Friday 19 September 2014

Quindell bounces again

Yesterday saw Quindell hit it's support of 163p, and sure enough, this morning it has bounced up, although nothing like as strongly on previous occasions.

As we hit support yesterday, I closed my latest short (for 10p profit per share) and I am waiting now for it to rise within the channel back to 177-179p, to short the stock again.

Readers of my previous posts will know why I am not prepared to ride the stock long up to that new short entry target.

QPP bounce and wedge

A contrarian view would notice that the tops and bottoms seem to be getting narrower, and the price can be viewed as a wedge rather than a flat or symmetrical triangle. As the top line is falling faster than the bottom line is rising, this is (just about) a falling wedge which is a bullish sign. It is so slight, however, that I would not buy on this.

You might say that in the shorter timeframe, there is a stronger top line gradient, as shown below

QPP Descending Triangle

but this would not help bulling chartists, because in the shorter timeframe, the bottom line is flat. This is therefore a descending triangle, not a wedge, which is a bearish sign!

I have no position at the moment.

(Incidentally, I ditched all my $FTSE, $DAX and $DJIA longs this morning)

Monday 8 September 2014

Scottish Referendum Hedge

The Scottish referendum on independence on September 18th has become extremely relevant to financial markets, with the new Sunday Times poll over the weekend suggesting for the first time that the Yes vote will prevail.

The damage to the pound has been immense. Already falling, it has fallen off a cliff since Sep 1st, and this weekend gapped a whole cent lower against the US dollar, and is not showing any signs of recovery.

GBPUSD gapped down nearly 1% over the weekend

Similarly shares in Scottish FTSE companies such as Weir and RBS fell by an even greater percentage.

However, strangely, the betting odds on a 'Yes' vote lengthened today. Spreadex were quoting £1 pays 3 yesterday and today are quoting 3.1 (21/10 in fractional odds which exclude the stake return), and this is repeated with all the other bookmakers

The aggregate site oddschecker.com shows that about two-thirds of the bets are for a Yes vote, yet the prices continue to reflect a No vote as most likely.

My advice to you if you have difficult positions (such as in GBPUSD or RBS) is to hedge them by placing a bet on the Yes vote. YouGov say they are going to win, so does the market, and yet you can more than triple your money. Another option is to spread-bet the result with a firm such as sportingindex.com. The odds are similar (currently quoting 7.7, which pays out 25 on a win, zero on a lose)

If the Yes votes win, you will get a nice return, and possibly a Yes win is now priced in. If No wins, there will be a surge upward in market prices which will cover your lost stake.

I wouldn't normally recommend betting as an investment decision, but the prices are all wrong for the data on this one. You could of course take the alternate view that the bookies alway know best, 'No' will prevail and load up on RBS/Weir shares and GBPUSD contracts.

Think about it.

Quindell loses last weeks support

The controversial Quindell (£QPP) has faded below 167p, a level it had held all last week, and stands at 164.5p at the time of writing. There is no support at this level, and given the volatility of the instrument, I would be surprised if it did not fade to at least 161p (well 160.99p actually), the low of August 14th, if not further to 158.81p, the spike-down price on Sep 2nd.

QPP H1 Loss of 167p support

I already told you on my last post that I have a large buy order at 160.5p, and the chance of it filling are now improving. I may now split the order, half to buy at 161p and the other half at 159p, as there seem to be two clear support points. I shall set a stop of 156p, just below the Aug 22 opening spike low, where, by definition, I don't think the price will go. So you see I am bullish for a small gain.

Long-term investors probably don't care about a few pence here and there, and are following the line taken by The Motley Fool, that the share has a P/E of 3, which is a tiny fraction of the P/E average for it's sector (be that insurance, electronics, or services), and the right price is considerably north of the ATH of 590p (which would still only be a P/E of 7).

However, the market feels there is something not right with the company, and paying attention to the share price movements at this depressed level, particularly whether it closes any lower that 153p (the recent nadir of Aug 2), gives long-term investors a heads-up to bail out, should these strange allegations be proven.

By the way, for the first time today, I have started to follow the increasingly common convention of prefixing UK stocks with a £ sign, rather than a $ sign and the letter L at the end, so it's £QPP instead of $QPP.L. I'll still use the $ sign for the $FTSE and $DAX. Not sure about the £AIM100?

Friday 5 September 2014

Quindell RSI divergence

I have been following the Quindell saga on ShareProphets, where several allegations remain unanswered, and of course I am aware of GCR's success in unmasking Lets Gowex. My overall position is that I do not want to be long if these things are proven to be true.

However I am not a long-term investor and price/action in the end is what matters for a trader, and QPP is volatile. I had another look at the short-term (H1) chart and it seems to me that the instrument keeps falling back to around 167p (current price at time of writing), making a quick squeeze to 160p, and then shooting up very quickly to 187p. It has done this twice since Aug 25 and we are back now exactly where we were on Sep 2.

Because the dip from 167p to 160p was so quick on both occasions, and I might miss it, I decided to close my short yesterday (for about 8p profit) and sit this out. The risk/reward ratio of, say, setting a limit sell of 162p was not attractive.

Here is the chart showing the fractals, the support, and the speed the instrument snaps back from 160p to 167p. The snapbacks were at market open, the first took an hour, the second one on Sep 2 took 5 minutes. They were not, however, overnight gaps which meant they were tradable.

QPP H1 chart

This however is not the only reason I have closed my short. Looking at the longer view, I discovered something I had not seen before when I checked the RSI(14 days). I found one of the clearest RSI divergences I have seen in a long time.  A case where the price has upper and lower parallel trendlines (tramlines) and the RSI also has tramlines. In fact the RSI has four touches on the topside and two on the bottom.

This is rare, RSI divergences are normally only a single trendline. And even more significantly, they are of similar and in my view material gradient. When I have had to zoom out to about 18 months to show the gradient properly, but I have seen many tops/bottoms called on divergences shallower than this one.

QPP D1 textbook RSI divergence

You can see in the RSI that there is a little bit of room to touch the lower tramline again, and obviously plenty of room in the price chart!). I am therefore thinking of putting a long order in today at, say, 160.5p, the idea being to let it rise, and then set a stop of just under 167p. (see above about the drops being tradable). If it doesn't fill, it doesn't fill, and that's that.

Note that I am only a technical bull here (and I am still anticipating a 7p drop!) not a fundamental bull. Until all these questions about Quindell inter alia paying capital to buy shells instead of paying fees (a clear breach of Ch.10 CA2006 if true) are answered, I cannot see this share rising above 275p, the blue resistance line on my chart. However, that is 65% ahead of where we are now, which I guess would satisfy most people.

Monday 1 September 2014

Gulf Keystone filling the gap

One of the easiest ways to make short-term money on shares is to predict gap fills and buy or sell accordingly.

A clear gap arose with the sharp drop on opening trade on 28th August. The gap is from 82.48p to 77.51p. We do not need to check whether it is fillable, because the subsequent price action ever since shows that the market is trying to fill the gap, even though that is counter to the prevailing trend.

A determined attempt was made this morning with the opening spike, but it fell back. It is therefore highly likely that (a) the price of 82.48 will be reached, and (b) once reached, the share will resume it's downward trend.

These are not large price movements, but they are very reliable. Therefore I have taken a larger than usual long position in GKP in the short term, with a target price of 82.48p where I will sell.

GKP Gap Fill

Of course I could be wrong and you could draw a trendline downwards now, which the last couple of hours price/action would support. Therefore I have a tight stop of yesterday's LOD 76p.