Confidence from fewer stop triggers

THE move up to close above 5800 at the end of last week was followed by another big fall on Monday and Tuesday this week to again cast some doubt on the uptrend continuing and rising to new highs.

The number of low to mid-priced stocks still showing strength increases as some of the top 100 stocks, particularly the major banks and Telstra, are seriously dragging on the index.

It is interesting that, over the past couple of months, the number of stocks breaking to new highs, then falling back to below where I would have placed initial stops, has fallen.

This is reflected in the stocks bought recently that are slowly increasing in price.

As these stocks move up and pull back in the normal fashion without triggering stops, my confidence increases that the market is strong.

I have been able to raise the trailing stops on several of these stocks without being stopped out at a loss for some time.

Lynas (LYC) has had its trailing stop increased to 13.5c, well above purchase price. The trailing stop on A2 Milk Company (A2M) was raised again to $4.98, the spike low formed on Tuesday. It will be interesting to see if it continues to move up now it has had a pullback from its recent high of $5.37.

If it does move up, the extension of the recent move from a low of $4.47 and Monday’s high of $5.37 indicates a likely target of around $6.

We may see some sideways trading to consolidate the recent considerable move up before the uptrend continues.

EML Payments (EML) has had its trailing stop increased to just above breakeven and Bathurst Resources (BRL) now has a stop at breakeven.

Some weeks ago, I mentioned watching Global Geosciences (GSC) for a move above 21.5c, a spike high and all-time high and a consolidation before buying.

This move occurred on August 16 and has since pulled back to test the May spike high and, on August 25, it moved above the sideways move after a volume increase the day before, triggering my buy. I bought 25,000 shares at 23c on August 28 for $5770 including brokerage. The stop is 21c, the low of the recent sideways move and the first target is about 30c.

It seems many of the stocks that continue to show strength are small resource stocks along with tech and healthcare and some alternative energy stocks.

On Wednesday, Big Un (BIG) finally reversed the slow pullback from the August 11 high, with a clear daily pivot point on increased volume from the $1.35 low, forming my buy signal. I bought on Thursday and the details will be in next week’s column.

There are other stocks I am watching and I will be adding to the portfolio as they move above breakeven – Livehire (LVH) and NRW Holdings (NWH).

PORTFOLIO POSITION

Cash ........................... $317,762 Shares .......................... $33,410 Total ........................... $362,172 Starting capital of $50,000 in July 2006.

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