Although even I have been known to describe the AIM market as the Wild West of the stock market, and others describe in terms of which the best is probably “casino”, I am a great believer in the concept. Indeed, if you look at the percentage risers on AIM for 2014 – ostensibly something of a nightmare year for holders of key plays such as Gulf Keystone (GKP) and Quindell (QPP), there is a positive message. This positive message I would argue stretches further than simply noting the multi baggers over the past 12 months.
I am sure most of us are familiar with many of these “bulletin board heroes.” Indeed, I first got into AIM stocks in October 2012 with the stock which is now LGO Energy (LGO). It was then around 0.6p and is now over 4p having hit 6.95p – I know that peak without having to look it up! What is more, during the 2 years plus, there was only one time out of all the calls made on the stock when I even started to wobble in terms of the bull argument here. The point I am making is that while it may be highly speculative, and some companies do fall quite painfully, if you are persistent and cling doggedly to the winners, there are decent returns to be made. This is true even if your batting average is lowered by a corporate collapse. Do not just take my word for it. Star fund manager Gervais Williams published The Future is Small earlier this year, and he has a track record in the smaller, growth companies that many would envy.
Another point to note from this year’s list of winners is the power of social media – something which may not be immediately obvious, but seems to have played its part. Twitter in 2014 became the traders forum of choice and in terms of the stock at the top of the pile. Concha was mentioned at 0.2p in January, and from then on I have been following the charting position. Once again, like the example of LGO Energy, this was largely a “one way” chart in 2014, with the big charting breakthrough being at the beginning of February with the spike through the 200 day moving average at 0.3p. The shares were so strong there was no need to test the 200 day line as support, something which is only seen in the most bullish of situations.
So it would appear that the name of the game on AIM from the above two examples is to be a momentum trader. The strategy is to always be on the lookout for the stocks which are outperforming and ride them as long as this remains the case. What is a comfort personally is the way that most of them have been familiar for months. In particular, Concha, Castleton (CTP), Fittbug (FITB), Ilika (IKA), LGO Energy, and Rose Petroleum (ROSE) are companies which have inspired private investors and been plays to back on dips again and again.
Perhaps the most “straightforward” of the favourites listed above chart wise going into 2015 is Castleton. This is because we are in the aftermath of an October–November triple 200 day moving average test. This was followed by an early December break of November resistance at 2p – a level which has since become new tested support. The chances are now that while there is no weekly close back below the 2p level over Q1 2015 we shall see a journey to the top of the one year price channel top as high as 4p. If nothing else this makes for a decent risk/reward trade given that we are still well below 2.5p.