Why did Quindell drop 20% this morning?

Unusually even though Quindell (QPP:LON) was at a low point on Friday, I took out another short position, and tweeted it, and some people may think why, as the instrument was already at it's lowest price for six months. As I did it at 16:29, I didn't have time to post details.

I have been following the instrument, as you know, for months, and I noticed the price had broken the previous tramline low, and thus was certain to touch the next one, approximately 105p. I also took a calculated risk that the opening volatility, which always seems to happen with this share would pull it, like a magnet to the psychological £1 round point.

If it did go to £1 (I reasoned), it would go even lower by momentum, and this is what happened, falling as low as 88.75p at 08:25. I moved my short stop loss to 100p (which as I am writing this has just sold, so I booked 18.5p profit.

So what will happen now. With this drop, the share has once again entered oversold territory, and so a bounce is inevitable, and indeed it may re-enter the tramlines. (As I write, the price is back to 110p, so indeed it has). The price should then recover to the top tramline (between 140p and 150p) before heading down again.

Alternatively, the tramline support of 105p may now become resistance, in which case 88.75p could be revisited sooner rather than later.

In any event, the bigger picture is still a downward trend, and perma-bulls and other people emotional about this should note the smooth technical playbook being followed, on relatively even volume.

It now seems extremely likely that the price will move all the way back to the all-time low on May 9, 2013 of 80.65p (adjusted for splits). I will therefore continue to sell rallies.

All this assumes no material news, good or bad, about the company.

Quindell obeys technical playbook

A week ago, I said that Quindell (QPP:LON, or £QPP) was entering an oversold condition below 125p and would bounce. What I omitted to say is how far, which I should have done, as most technical analysts would say that for a downward sliding stock is that when it bounces an oversold condition, it will recover half-way to the last high, and this is exactly what has happened.

£QPP textbook technicals

From the 13th October high of 166.50p, down to the last low of 123.72p gives a recovery point of 145.11p, which is where it reached on Friday night. I was waiting for this and placed another short, my previous one having been sold at 125p as per my last blog post. Note I could have gone long on the bounce, but I didn't dare, given the second GCR tweet and lent-out percentage of 97.58%. There is another GCR tweet today, by the way.

Sure enough, the instrument is back on it's path downward again, and of particular note is the long-tailed candlestick at 8am this morning, which reached down to 38.2% of new high-low, viz 132.15p. Interesting, isn't it, how these fibonacci points are so accurate. This gives me a clear first target for my short, ie it will try to get there again. (I have to say by the way that the 2p recovery in the last hour today was unexpected, but it doesn't change my view)

£QPP new Fibonacci projection 

In summary the trend is still down, and I will continue to short rallies. I have so far, using spreadbetting, made my stake several times over. I believe this stock is following technicals exactly because there is no news either way on the GCR/Shareprophets allegations.

I have noticed, incidentally that in the last eight weeks, the downward channel range has tightened. See the chart below. The range is now within the blue tramlines rather than the black ones.

£QPP narrowing tramlines

Unfortunately for bulls, this doesn't help, as although the tramlines are narrower, they are at the same gradient as the old ones.

As an aside, I am amazed by the amount of emotion generated against people who are bearish on this instrument. It's just a share, like any other, where you follow price/action. I cannot understand why people who are holding long-term write to bulletin boards every day. I am a long-term holder of Minco (LON:MIO) and Fastnet (LON:FAST) and am well underwater, but I know they will come right in the end. I certainly don't care about people shorting them. Also it is extremely unlikely that retail shorting has any effect on any share except micro-caps (with >10% spread!). If only it did - you'd never lose!

Quindell approaching oversold

Quindell (QPP:LON) put out a 'good' trading update yesterday and the shares fell 7%. They fell another 7% today. My new short is doing well. They closed tonight at 134p. It is possible they could drop to 125p in line with the tramline movement, but if they get there quickly, an RSI oversold condition will obtain. This may well cause a bounce back to 150p.

I think they will keep doing this until they hit the long term and psychological support of 100p

In the meantime, I understand that GCR have been tweeting negative remarks again about Quindell. Perhaps this has caused the price drop. I do wonder whether long-term institutional investors are eschewing this instrument (other than to sell it), which means that the whole market is driven by (retail?) traders. Certainly the volume has dropped right off.

So to summarise, I am holding short again, from that bounce to 165p the other day. I do recommend you set fairly wide stops if short, as the share seems to bounce first thing every morning, before fading all day.

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

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)

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?