Australian Investment Blog

Answering subscribers questions

Welcome to our third week of answering subscribers questions on a Monday, please keep them coming and we will enjoy answering them, including the tough and confrontational ones!

Question 1

"Couple of questions: 1) What Charting / Technical Analysis are you using to determine when you enter and exit a stock i.e. it appears to myself on several recent trades (SEK, GNC, VOC...etc.) that you have been early in and early out, while also missing other opportunities in the market (APO, Aurizon..., etc.)? Of course, I realise that trades will never be 100% or can be specifically timed, but GNC rose well today, SEK is up since we exited and there was an opportunity to get in on several stocks lower than the initial entry price. 2) When I joined, there was the mention of someone who had just joined the MM team and would be focusing on Small Cap Stocks - this has yet to eventuate and wondering what the status is?" - Kind Regards! Dave.

Answer
We will answer these two questions one at a time for the aid of simplicity:

Technical Analysis:
At Market Matters, we combine a number of different subjective Technical Analysis tools. However, only when /if they are clear - we do not believe in, for example, being an Elliott Wave trader and attempting to fit all charts to this specific method.

Technical Methods we do like in no specific order are:

Distribution Theory, Wave Symmetry, DOT Theory, Candlesticks, Fibonacci Levels, statistical and seasonal analysis plus Elliott Wave.

We will also do occasionally throw in some "Gut Feel," which hopefully has been honed by many years of following markets e.g. we want to be in stocks that perform well to what we perceive to be positive news.

Quickly looking at the 3 specific stocks you mentioned in recent trades while keeping things simple:

Vocus (VOC) - we like very much as a company on a fundamental basis, although we are conscious that the Telco sector may be a laggard for the rest of 2016. We purchased VOC after it retraced ~$1.30 (13.7%) i.e. wave symmetry retracement to the $1.29 pullback in early 2015.
Our target remains a test of $10 - an Elliott Wave 5th / fresh high.

Vocus (VOC) Weekly Chart


Seek (SEK) is a company we have been in and out of a few times since our inception, which is no surprise considering its recent 40% correction.
Similar to VOC, we remained comfortable with SEK after its major correction, as it fitted the wave symmetry target back in the GFC – remember, markets are driven by human emotions and hence, do repeat themselves.

We exited SEK after their most recent trading which we felt contained some "hidden" downgrades - a fundamental decision - time will tell, but the stock is clearly exhibiting strength at present.

Seek (SEK) Monthly Chart


Technically, Graincorp (GNC) appears to have made a false spike under $7.50, hence the Distribution Theory targets a rally back towards the $10 area - albeit against the trend, hence not as exciting.
We exited GNC after it failed to maintain gains after a major broker upgrade and were unable to exhibit strength to match the overall market - poor reaction to positive news.

Graincorp (GNC) Monthly Chart


When it comes to missing out on some opportunities, unfortunately, this will always occur and not ever worth losing sleep over, BUT the good news is markets provide more every week!

Small Cap Stocks

We have at least two fresh faces starting with Market Matters in August, so hopefully we are much closer to achieving this goal. We are obviously only interested in expanding our offering when we can do so in a quality manner.

Question 2
"Hi, I Heard VTG and BAL are set to exceed expectations in the coming reporting seasons. Hope you'll cover these two maybe in the Monday report or weekend report." - Lakshan.

Answer

An interesting if a touch controversial question....which is good!

Firstly if you do know that VTG or BAL are going to report well, it’s totally illegal to buy shares with this knowledge in your possession - jail terms loom for insider trading.

However, our experience as a collective group is, a lot more $$ is lost than made from "tips". Hence we recommend keeping one's ears closed and ignoring all rumours! Be in the minority and do your own work, researching stocks before making decisions....do not use the market like a casino, as there is no easy legal journey to wealth.

It's also important to consider what the market is expecting when it comes to results; the following saying exists for a reason "buy on rumour, sell on fact" you do not want to be buying when the market is taking profit.
On the 2 stocks you mentioned:

1. Bellamy's (BAL) - We are neutral with a positive bias. Technically we would use stops ~$10.80 if we bought....potential Chinese government regulation changes remains a risk here.
2. Vita Group (VTG) - The stock is making all time highs having rallied over 100% in 2016, the obvious comment is it needs to report well to justify this advance.

Question 3

"Does Market Matters (MM) trade in options, particularly when MM takes a stock position" - Peter.

Answer - The question is great as it hopefully clarifies a few points very simply.

1. The MM portfolio currently holds no options positions and it only follows subscriber alerts exactly as / when they are sent - the MM Portfolio is an actual real money portfolio transacted through Shaw and Partners Pty Ltd.
2. MM staff / owners do personally trade / invest through options on a fairly regular basis.
3. Options are only suitable for sophisticated / knowledgeable investors due to their leverage nature. If any subscribers wish to learn more, please drop us an email and we can arrange a free chat with an advisor.

Summary

No change for a Monday

• Market Matters is a reasonably new report, which has experienced incredible growth over a short period. We will continue to improve/develop MM with the input from subscribers.
• Importantly, we’ll stay true to our beliefs and will always strive to be unique and original.

• The Broader S&P500 has closed higher for a fourth straight week, finishing Friday up 10 points (+0.5%) at 2,175. The Dow managed a daily close of +54 points (+0.3%) at 18,570, also finishing the week in positive territory, having risen three out of the last four weeks.
• Oil closed on a weak note last Friday, dropping 56c (-1.3%) to US$44.19/bbl, as concerns continue regarding the oversupply. Analysts pointed to the increasing number of oil rigs that have been stating up in the US, which has risen for a fourth straight week, but also the amount of oil that remains on vessels at sea and in storage.
• Gold slipped lower on the back of tension between the easing of global interest rates and the likelihood of a rate increase in the US before the end of the year. Gold finished down US$7.60 (-0.6%) to US$1,323.40/oz.
• The September SPI Futures is indicating the ASX 200 will open marginally higher this morning, up around 27 points, to the 5,525 level.

All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 25/07/2016. 9:00AM.

Reports and other documents published on this website and email (‘Reports’) are authored by Market Matters and the reports represent the views of Market Matters. The Market Matters Report is based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.

The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distributions without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself or if you require a personal recommendation, you can seek the assistance of a financial adviser. Market Matters or its author(s) accepts no responsibility for any losses or damages resulting from decisions made from or because of information within this publication. Investing and trading in financial products are always risky, so you should do your own research before buying or selling a financial product.

The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports.

If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.


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