The Crash Cometh – Metals Australia Limited

As posted previously about MLS and the recent trading halt it looks like my prediction was way off. MLS has plunged 41% today on news that its court case over a uranium project in Namibia has been judged and not in their favour.

They have indicated that they will be appealing the courts decision but as an invester I’m inclined to think that they are just going through the motions by continuing the proceedings.

I have watched this stock for quite a while now. Seen it rise up and down on speculation and announcements but now it’s time for me to file it in the “penny dreadful” drawer.

Happy Trading.

The Rise and Rise of the market.

The last two weeks has seen the biggest bull run on the Dow in 9 years. But are the fundamentals to justify this run really there? There is no doubt the US economy has reached or is getting closer to the bottom but the question remains what happens when it gets there?. The value of the DOW has already rebounded over 40% from its low in March. Analyst seem to like saying that the prices on the stock market run about 12 months ahead of the economy because of its speculative nature. So if this is true, then the speculators out there are showing a belief that once the economy hits bottom there will be a V shaped rebound. I am struggling to find evidence that this will occur.

There is a bit of an attitude going around that that recessions and booms are just part of the natural cycle of things and that one will automatically follow the other, much like the seasons. This of course is a a ridiculous notion as recessions and boom happen for reasons they don’t just happen. The current US recession happened because the fundamentals of the US economy were unsound, the huge budget deficits, imports far exceeding exports and a bloated housing market, all of which required unsustainable amounts of foreign capital to maintain.

So the question remains where is the recovery coming from? Have we learnt that although a consumer, service based economy is fun while it lasts it isn’t sustainable in the long term? Are we introducing new measures to increase productivity? What measure are we introducing to reduce our reliance on imports and increase our exports? Sadly I’m not sure the answers to these questions are anywhere near satisfactory enough to justify the bull run the market is on.

Cheers Craig

About to pop – Metals Australia Limited

Here we go, Metals Australia Limited (MLS) has entered a trading halt and it is highly likely it is in relation to the court case in Namibia. Good or bad this decision is going to send it moving one way very quickly.

My prediction, it will be a positive decision and the share price could easily touch 4.5/5c during the course of the day. Obviously I don’t think that it will hold at these prices but if you follow the 45 minute rule (sell 45 minutes post announcement) then you could definitely get a very nice price. Of course if it tanks then waiting 45 minutes could send you broke.

I love these kind of announcement because it’s akin to playing at the casino. Roll the dice!!!

Antares Energy Limited – Official Suspension

I smell something here, having rode the rollercoaster a few times on a number of shares (PNA, LYC, GDN) I know that an official suspension from trading on the ASX is either usually very very bad or very very good for the share price when it is lifted and begins trading again. I’ve yet to see a share resume with a mild trading day, maybe OZL is the exception however that suspension lasted months and the details or theories on the suspension were trawled over a billion times.

So, as one of my few remaining investments I wait. My gut feeling says that this company who have had a very chequered past have finally got it right this time and that this could be some very good news especially if the proposed capital raising is not a blatant cash grab for current holders or their institutional mates but rather brings on board a significant international investor that will give this company the breathing room to really develop and plan long term. Who knows…

HAW – Hawthorn Resources Limted

Really got smashed on this trade:

Buy HAW @ 1.2 cents

Sold HAW @ 1.0 cents

Loss ~20%

Manage to create this loss in under 2 hours and learnt some more valuable lessons.

Lesson 1: Never trade when your primary trading platform is not working. I spotted this trade just minutes after the company released an announcement to the market relating to some good drilling results on one of their tenements. As news of the release filtered out and was picked up by traders the share price which has placed in pre open for the announcement was swamped with buyers. Some 60 million buyers placed orders and the match price for open started to rise fast. My trading plan was to get in at the open for 1.1 cents and exit at 1.2 minutes later. Unfortunatley my trading platform was having problems so the order had to be created manually and by the time this got done the match price had risen to my target exit price of 1.2 cents.

This is where I should have stopped. I had a strategy planned and altered it in the heat of the moment.

Anyway I decided to place an order at 1.2 cents and the order got filled at the open. I now adjusted my exit price to 1.3 cents and waited.

Lesson 2: Even on a quick trade always do your research. About an hour post open the share price was steadily rising with millions on the buy side and my sell order at 1.3 cents looked like it would be taken out within an hour or so. All good. Then a seller dumped 32 million share at market and pummelled the buy side down to 0.9 cents. The effect was two fold. Firstly it absolutely spooked the market and saw the buy side pull orders and secondly initiated a flood of sell orders at market. Literally in the space of 2 or 3  minutes the ratio of 2:1 on the buy side turned to 1:2 on the sell side. The only salvation was that I acted quickly and got my sell in at 1.0 cents before the close which got taken out before the share found a base at 0.9 cents.

After the my initial exasperation at what just occured, good announcement, massive build up, great volume I decided I would have a look through the company announcements for any information that may shed a light on what just occured. I found what I was looking for. Just a couple of months prior the directors of the company had dumped ~100 million shares on market after a good announcement. Nice one chaps.

It would appear the same had happened again. Basically the directors, by dumping (if it’s confirmed), obliterated any support for the share which has now fallen 10% off the pre announcement price.

Costly lessons to learn.

Happy Trading

MGX – Mount Gibson Iron.

I think this one is a good little prospect, it is a profitable iron ore mining company whos major shareholder is Shougang Concord International, which is a Chinese state owned steel manufacturing company (among other things) . MGX was one of the first companies last year to announce a reduction in demand from China and it’s share price was punished quite severely for it.

As the rest of the market collapsed over the next six months it’s price continued to drop further, so it seemed to take twice the hit of other ore companies just for being the bearer of bad news. More recently it has renegotiated its ore prices in line with the deals Rio and BHP received (a 33% reduction). It’s mines are producing well with drilling done at new sites with expansion probable in 2010. Ore sales are continuing to increase after the intitial drop in the december quarter last year. I think it is a geniune business that it still undervalued by the market.

Cheers Craig

Beginners Blog

Well the trouble continues. I held onto my VBA shares until today but I got out at $0.32 after deciding that they were not going anywhere. I have been watching AZZ a gas expolation company that has been doing well lately. Over the last couple of days it’s price had dropped from 0.38 to 0.32 so I figured I could get some value and make a quick profit when the price turned, Instead of just buying at the market price of 0.32 I decided to try and get a bit of extra value so I put in an offer of 0.31. Greed got me, my price was never reached and it seems I have missed the rebound. So I’m currently without any shares but I have decided to put in an order for MGX and we will see how that goes,

MLS – Metals Australia Limited

This is a speculative stock that I have been keeping my eye on lately. MLS has a number of mining interests covering nickel, zinc, copper, gold and uranium. It’s that last commodity that has drawn interest from investors. The company is tied up in a legal battle in the Namibian courts over the land title to their potential uranium resource. At present the case has been heard in its entirety and the sitting judge has retired to consider his decision.

The company has released statements indicating that they are confident of the merits of their presented case and that they expect a judgement within the next 1-4 weeks. This is where it gets interesting. This share has steadily been climbing as indicated by the chart below:

To me the most telling indicator on this chart is the volume that has been built since the mid April spike. It looks like this stock now has some increased interest from investors and I’d suspect that interests is in the outcome of the Namibian court case on their Uranium play.

If the results of the court case takes weeks and drags out then I’d suspect some investors will be shaken off and a retrace of the share price could follow. If this occurs and the share retraces back to sub 3 cents per share then I like it at that price and may take a position. There seems to be some support at that level and it would allow a reasonable exit should the court case go against the company interests. Looking at the potential upside on this share, I would not be surprised that if a retrace occurs and the company recieves a positive result that the price could easily exceed the recent highs of 4 cents per share.

Happy Trading.

SkyGrid Beta

Now this is very very cool. After registering ineterest in being a beta tester for SkyGrid I finally received confirmation and access to the newly launched news aggregator.

If you haven’t heard of SkyGrid it’s a startup aimed at traders providing a real time news stream that competes with services such as Bloomberg. If your a trader and a news junkie then this is one addictive tool. Breaking news from across the globe beams to the screen filtered and sorted by seemingly complex algorithms that group related news together allowing you to quickly cover the same news item from sources around the globe.

This is a godsend for individuals like me who 1) Can’t afford $500 a month for a subscription based service 2) Constantly trade with news websites open in the background.

Here is a screenshot

Country with just a service economy to support it

I follow Techcrunch daily and today came across this little gem. Whilst slightly off the trading topic it can broadly be related to the plight of many developed economies.

What do we manufacture in Australia that is exported globally and is a market leader? I can think of few pharmaceutical products and some small engineering plays but it would be a pretty short list.

It’s these truths that caution me against the current market bull run and whether or not it can be sustained in the short or long term. The credit crisis which brought down markets was a crictical structural problem and I can’t see how a recovery can form without major structural change. What have we done to change yet?

Happy trading.