By Zak Mir
As we saw in the wake of the FOMC’s September meeting, markets often appear to exist to test us. Getting it wrong is, in many ways, part of the process of getting it right (if that doesn’t sound too facile!). Very often, times of major surprises can present the best opportunities as traders are wrong footed. The current situation is exactly one such example as market participants attempt to figure out what is next for gold and stocks, now that the taper appears to be off for the time being.
For today’s blog I have chosen to look at some of the more difficult stocks of the last few months to see if any of them have anything new to tell us.
My first pick is Ruspetro (RPO).
In the last month, RPO has made a clear attempt at a lasting break to the upside. This move higher was preceded by a late August bear trap dip below the 50MA, which now stands at 31p, and July’s floor at 27.3p. The reaction over September was very positive and there was even a brief spike through the 200MA, which was still falling at 40p.
Optimists could argue that while there is no end of day close back below the former neckline resistance of 35p, last seen in mid-August, then a recovery towards the top of the 2013 price channel is on the cards. This could happen over the next 4 to 6 weeks, with a target of 55p. However, given the stock’s recent history of false dawns and other unwelcome price traps, it might be best to wait for a momentum trigger, before doing anything with this stock. Ideally you would want to see something like an end of day close above the 200MA of 40p, together with (if you are being really fussy) a break through September’s weekly intraday high of 45p.
Although it turned out to be something of a storm in a teacup, fears over a derivatives loss at Quindell Portfolio (QPP) certainly did a lot of damage to this company’s share price, during May.
Perhaps the biggest catch, as far as QPP is concerned, was that spring’s sharp downwards movement to 6p was never retested.
Instead, the shares ground higher, breaking above the 200MA at 12.75p in the middle of last month. We may become cautious at the current levels because there have been three clear failed attempts at breaking above 17p on a sustained basis in the past month. In fact, while the stock is above April’s former resistance at 15p on a weekly close basis, then it is quite feasible further gains could be made to 20p or more. It is possible we could see a move as high as the top of March’s price channel at 24p by the end of the year.
The lesson to learn from Quindell Portfolio is that sometimes it is better to ignore the doom mongers and merely allow oneself to be guided by the price action; no matter how at odds with alleged fundamental realities this may be.
Finally, we have something of a personal favourite of mine in the form of online dating group, Cupid PLC (CUP).
By rights, this company should have bitten the dust months ago; at least if you believe the hype of the doomsters.
However, I prefer to make my decisions, based on the charts. These suggest that, unless there is a lasting break below the upper 50p zone, this stock could become a target for bottom fishers. This will be the case while the share price is backed by a line of support from March at 60p, extended February RSI support and the latest break for the oscillator above neutral 50. In fact, the only missing piece in this particular jigsaw for a strong buy is an end of day close above the 50MA at 66p. With Cupid I am cautious, yet hopeful. A best case scenario sees this stock regain its May resistance zone of 80p-90p over the next 1-2 months.