Zak’s thoughts – Eurobashing, Man Group, Supergroup & Stratex

Zak Mir 

I note the way that so far this week the equity markets have gone back to the slow death sell off mode – something which was characteristic of the period before the September QE3 intervention…. 

Traders appear to have forgotten that there is “unlimited bond buying for an unlimited period underway”, or maybe they just don’t believe it? Perhaps rather than Draghi / Bernanke they now prefer to believe the anti Euro brigade or more accuratelym just the plain old xenophobic bunch that is the financial press – wheeling out the same old stories about 6% plus PIIGS bond yields, imminent bailouts and economies in a tailspin. While I would be happy to go along with this gloom argument, whenever Merkel / Greece / Spain / Troika are wheeled out we get a reminder of the concept of “unlimited” and the equity markets invariably respond to the upside. 

To pare it down to the bare bones, what the financial authorities are effectively saying is – go short of bonds and stocks if you wish, but we will be going long on the dips! This is a de facto shorting ban (aswell as an actuality in Spain as many spreadbetters will have found recently if they tried to short the Spanish market) and likely good news – in the end – for bulls of the stock market. For the moment however too many people out there still cannot / do not want to believe this new game, no doubt after being short of the Euro at $1.22 and seeing it go nearly 10 cents against them in less than 6 weeks at the September peak. Ouch! 

Man Group / Supergroup 

Something which I am sure many traders find it difficult to do is to follow / chase a stock or market when it has already risen significantly. It is of course understandable as it really is human nature – nobody wants to overpay. Indeed, it seems that the most popular strategy for many punters (particularly new ones) is to try “catching a falling knife”. 

I believe that with both Man Group (EMG) and Supergroup (SGP), even though they have already risen significantly in recent weeks that there may be say 20% uplift still to go. In the case of Man Group, ahead of next week’s trading update, the shares could make it as high as the top of a rising trend channel from July at 103p. For Supergroup,  the expectation is that while there is no end of day close back below the September £6.66 intraday high, the shares will deliver further gains towards the top of a rising trend channel from June on the daily chart, perhaps as high as £7.80 over the next 3 to 4 weeks. 

Stratex International 

For anyone looking for the speculative “fun” and adrenaline that only penny stocks can provide, the situation that caught my eye today was that of Stratex International (STI). 

Here we appear to have a brief September bear trap below the main post July support at 4.5p, and which suggests that while there is no end of day close back below this zone there could be a near-term rehabilitation for the shares. Perhaps the best case scenario on offer at the moment would be a test of the 200 day moving average currently just below 7p by the end of October. Worth watching!