Wednesday, April 25, 2007

AUSGROUP - breakaway gap trading

Shit lah, never get any IPO shares for Foreland fabritech. I bidded 35 lots, still never get any. I heard the strategy is to bid 1 lot, because there's quite a number of cases where people actually bid 1 lot and get 1 lot! Almost like striking 4D. It's 21.4 times oversubscribed, sure open much higher than 0.21 cts IPO price...well too bad.

The good thing is that today I bought Ausgroup. After being informed by Joshings from cna forum (an excellent technician), I bought it straight away. Let's analyse the reasons for this purchase and why this stock rallied on and on. My phillip broker said that the trading floor is going 'wah' over ausgroup, haha!

I bought ausgroup because it had a breakaway gap. A common gap and breakaway gap is different because breakaway gap are gaps that will not be covered at least for a long time. Breakaway gaps are formed because of news/report (copyright from Joshings from cna forum). The best way to trade breakaway gaps is to buy in and ride the trend up until weakness sets in. No targets is set and all resistance/supports are thrown aside. Cut loss is set at 3 bids below the opening price. Using DBS vickers, which shows the MACD and stochastic charts up to the intraday price, I noticed a crossover of both macd and stochastic, with RSI trending upwards. More imptly, MACD is above the 0 line (VERY IMPT!) AND crossing over. Combining this with stochastisc crossover, it's a very strong buy signal.

(Thks joshings from cna forum for generously sharing this impt technical point which cannot be found in textbooks!)

I bought 5 lots at 0.830 to try and today it reached an intraday high of 0.92 before closing at 0.900. This is identified as a breakaway gap because ML, ever powerful ang mo brokerage house, initiated a buy call with tp of $1.10. The result is a huge rally up with 10 times normal volume! The last time ML issued call is on swiber, all cheong like mad too.

I need to analysis the sell signal too. Based on my rudimentary knowledge of flags, i spotted one begining at 28th March to 9th April (sorry, the charts read 9th aug, too lazy to change), with flag target of 0.950. Since the tp set by ML is $1.10, I will be looking to sell around 0.950. If tmr gaps up to that level, I'll sell and take profit first. I don't intend to hold ausgroup for long unless it gaps up so much that i can never buy back at the price I want. We'll see how dow performs tonight and decide in the morning. Might add more too.

FA wise, Ausgroup is very strong. It's doing engineering services with oil and gas, as well as mining related industries, with major customers as BHB billiton, Alcoa, BP, Chevron. ML reported that they are trading well below their peers, so it's undervalued (I don't understand why yet, still reading up!). Should have record earnings over the next few years. I know, all the oil stocks (including swiber) and offshore marine, oil rigs business is booming.

Swiber went up more today, +0.05 today to close at 1.90. Reached an intraday high of 1.93 too. But I can see the buying starts to show signs of weakness already. Have to retrace a bit, consolidate before the run up continues. Swiber is definitely the best buy for the year for me. It's been running up so far and haven't consolidate yet. Looks set to break $2, which I think will also be the resistance and the start of a pullback.

Heard osim makes 17.3 million loss in Q1. Bollinger band tightening with macd doing downtrend, means we are going to see some real big moves for osim, very very likely to be on the downside. Shortist target, for sure.

Dow is doing cha cha around 13,000. Now is +38. Europe mostly green.