IAU - an interesting but risky play

IAU is in play. Shareholders will have to vote on June 18 and decide to stick with the current board or hand the company over to the suitor (Quantum). For the full story go to the company's website here.

The stock is currently making a saucer bottom which is a reversal pattern. I would suggest that this pattern is being driven by increased volume, slowly - and I stress SLOWLY - chasing prices higher. The buyers could very well be based in one of the two camps struggling for control of the company and this can be an exploitable situation for short term traders.

We could buy the stock at say 33 cents with a view that over the next three weeks, the stock will increasingly become hotly contested as the vote on June 18 gets closer. The more stock you own, the greater your influence on the vote, therefore, you would imagine that stakeholders in this company such as directors and large shareholders will be keen to soak up stock as they head into the vote.

Its a risky play.

Look at the bottom line of this snapshot of the market depth. Over nine million shares are on the bid side and only 1.6 million are on offer. We hope this sort of buying pressure forces IAU's share price up towards 50 cents over the next three weeks to allow us to capture a short term proft.

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Our new FREE fortnightly newsletter is now available.

Please feel free to download this fortnight's newsletter.

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ALSO, dont forget to check out our Trading Psychology Blog HERE
We have started a series of articles on trading psychology on this blog. These articles are based on material in our NEW BOOK, THE MENTAL TRADER: Winning the Mental Tug of War in the Market.

BOOK LAUNCH DISCOUNT SPECIAL

This book has been reviewed by Daryl Guppy and Alan Hull.

ABOUT THE BOOK, Daryl says:

"I think he (PAUL) has got some useful and interesting things to say. Thisisnew material and a good guide for new and existing traders."

ABOUT THE BOOK, Alan says:

"Hi Paul, just finished reading your book and I believe it to be a well written book with some very worthwhile insights - its engaging, anecdotal and reflects the fact that you are obviously well read yourself and an experienced trader/investor. I would recommend it to my students but I would place the caveat on it that it requires a degree of prerequisite knowledge and market experience."

Thanks Daryl and Alan.

AGO and CCL

If you've been following our FREE fortnightly newsletter (go here for archived newsletters) you will know that we were looking for a bounce in the AGO share price based on the practical application of our RCR technique (to learn more about this technique, buy our Ebook here). We also said that the RCR gave us a stop-loss level of 86.5 cents. Any close below that meant it was time to abandon AGO. That time has come.

Those who have already bought our Ebook can use the ASX ticker code AGO as a relevant example for this technique as outlined in this book. This blog will continue to discuss trading examples that utilise the proven application of indicators shown in the book.

Let's turn to the ticker CCL listed on the ASX. It will seem inconceivable to some readers that this blue chip stock could fall back to $11, but this is exactly what the chart is telling us.

Application of standard technical analysis of the inverted or upside flag pattern which is forming in the CCL chart, suggests that the stock will look for a short term bottom at $11.

Watch out below. If the stock breaks above $13.50 however, this analysis becomes null and void.

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Flag me up Scotty

Imagine you are a trader with limited funds and you identify three potential flag patterns developing in the Australian market. Which one do you trade?

This is where a trading plan, a trading philosophy and the tick-in-the-box approach comes in handy. I discuss these things in my book Simple Tactics, Profitable Trading and owners of this book know what I am talking about when I reference it here in this blog.

So, our three stocks are BHP, STO and QBE. We will update these charts at the end of the week when we publish our next FREE fortnightly newsletter (back issues available here).

All three stocks look fairly similar but we prefer to trade with as much safety as possible so we look at a small number of variables or indicators and trade only those stocks which have all the variables lining up at the same time.

Only one of these stocks is suitable for us at the moment. We will reveal which one we are personally trading in our newsletter at the end of the week.

Here are the charts.
   

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BOOK LAUNCH DISCOUNT SPECIAL

One for the Short Sellers

Boral (BLD) recently came out with a weak report. The market sold the company down from $5.08 to $4.31 and now the company sits just above $4.50. This sell off is the first in a two step sell off. The first sell off has established an inverted or upside flag pattern. This is a bearish pattern with a high probability of success. If BLD breaks below the $4.40 level, there is a strong chance it will work its way down to our downside target of around $3.65.

We will follow the progress of BLD in our next Free Newsletter available from this blog and from our website, www.stpt.com.au



BHP looks good on the surface but underlying weakness tells us a different story

A rudimentaryobservation of the BHP chart shows the foundation of a bullish flag pattern under construction. However, more seasoned traders know that it is vital to have at least one indicator supporting the pattern development. We prefer to use the stochastic indicator. As outlined in my book, Simple Tactics, Profitable Trading (read a free sample chapter here), we know that there is a strong correlation between this indicator and the quality of breakouts.

Flag patterns are a breakout set up and without underlying momentum in the stock (as indicated by the stochastic indicator) the breakout is usually weak and there is even a chance that the breakout fails to eventuate. For this reason we would be holding off from buying BHP at the moment. Recent price action looks good, but it appears that the market as a whole, is not yet buying into BHP being valued much higher than$35 on the top side.

BOOK LAUNCH DISCOUNT SPECIAL

This book has been reviewed by Daryl Guppy and Alan Hull.

ABOUT THE BOOK, Daryl says:

"I think he (PAUL) has got some useful and interesting things to say. Thisisnew material and a good guide for new and existing traders."

ABOUT THE BOOK, Alan says:

"Hi Paul, just finished reading your book and I believe it to be a well written book with some very worthwhile insights - its engaging, anecdotal and reflects the fact that you are obviously well read yourself and an experienced trader/investor. I would recommend it to my students but I would place the caveat on it that it requires a degree of prerequisite knowledge and market experience."

Thanks Daryl and Alan.

Our Latest Newsletter is ready for download

The latest issue of our FREE fortnightly newsletter is now ready for download. In it we follow up on BHP and AGO from last time and we update the NEN chart from our post on this blog from last week.

CLICK HERE TO DOWNLOAD YOUR FREE COPY NOW

ALSO, dont forget to check out our Trading Psychology Blog HERE
We have started a series of articles on trading psychology on this blog. These articles are based on material in our NEW BOOK, THE MENTAL TRADER: Winning the Mental Tug of War in the Market.

BOOK LAUNCH DISCOUNT SPECIAL

This book has been reviewed by Daryl Guppy and Alan Hull.

ABOUT THE BOOK, Daryl says:

"I think he (PAUL) has got some useful and interesting things to say. Thisisnew material and a good guide for new and existing traders."

ABOUT THE BOOK, Alan says:

"Hi Paul, just finished reading your book and I believe it to be a well written book with some very worthwhile insights - its engaging, anecdotal and reflects the fact that you are obviously well read yourself and an experienced trader/investor. I would recommend it to my students but I would place the caveat on it that it requires a degree of prerequisite knowledge and market experience."

Thanks Daryl and Alan.

Small Energy Stock Making All The Right Technical Moves

Our Range-Change-Ratio technique is designed to help us identify where the stale, bearish money in a stock finally becomes exhausted and begins being replaced by new, bullish money. It is a technqiue that uses price and volume to give us our entry signal. For more on this technique checkit out in our eBook, Simple Tactics Profitable Trading.

The chart below is of a stock which has recently generated an RCR entry signal of 71%. It is a small energy play listed on the ASX. Will it hit the neon lights of the big time? Maybe.....maybe not. But we make note of the chart as it currently stands at the end of the trading week because we intend to follow up this stock next week in our FREE fortnightly newsletter (current issue can be downloaded here) as an example how the RCR can be used in real time market conditions to generate an entry signal.

The Chart:

In the meantime, dont forget our other webpages:

http://www.thementaltrader.blogspot.com.au/

http://www.meetup.com/trading-psychology/

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