Short Squeeze or AIM rally?

It’s probably both.

2013 has got off to a flyer and it’s not surprising to see some AIM listed commodities bouncing back strong after being neglected for the bulk of 2011 and 2012. Markets/Traders often rotate from sector to sector or index as they seek the next value opportunity whether that be targeting over bloated stocks or under performers.

It’s been quite odd to witness QE3 (and QE4) in full flow and many of the FTSE 100 and 250 stocks zipping up like they’ve been sucking on new years’ helium balloons. Earnings have been lacklustre yet the city firms keep buying them. That’s the trouble when you’ve got wedges of QE3 cash to wash through the system – you go for the low risk economy rinse and skip the mega double wax deal. The mega double wax deal is of course reference to the all sparkling and shiny high risk growth stocks. They offer great returns on success but can deliver more than a bloody nose upon failure.

So as we enter another earning season/quarter, it’s probably no surprise to see some of the traders/market move back to the neglected high growth E&P sector. After all, some of these stocks are trading at below 2009 levels when oil was priced at $40 per barrel. It’s bonkers. Whilst funding is far from easy and RBL’s are tricky to secure – finance has improved as the banks have stabilised. This is one risk factor that has changed over the last 3 years. Not much, but it’s likely to get better if the Banks continue to grow and recover. QE3/4 helps too.

There;s a saying in the market that goes like this… ‘Volume is your friend’. How true it is. If a stock encounters higher than normal volume – it suggests that bigger fish are at play. This can work both ways. To the upside (share price rising) it’s clearly an encouraging sign of positive interest. To the downside (sp dropping) it’s normally a sign of negativity. Share prices in the AIM index are volatile and can move dramatically on minor volume. Hence it’s quite easy to see ‘fake’ rises or spikes which fade in a matter of days on low to average volume. But when volume is large – the move is often defined as ‘solid’. It doesn’t mean that it will last forever or that the stock will head up in a straight line – it’s simply saying… there’s some ‘weight’ behind this move.

With weight comes money. Higher volume means higher money flows. More cash being invested or traded etc. When you see a stock trade with anything over 3% of its float (or shares in issue) – then it’s not likely to be down to the little guy. It’s more than likely II’s or trading/broker houses as they have the firepower to drive large volume. Of course, on meaningful news days – pi’s or the smaller guy can give the II’s (Institutions) a run for their money as thousands seize upon good news or exit on poor.

So what happens when you see a stock trade with very high volume on one day or several yet see no news or events to justify it? Well, the chances are it’s not the little guy. It’s more than likely the II’s or broker trading houses plus a few TA/Chart followers.

Then – throw into the mix the ‘short interest’ or shares on loan (SOL). Stocks with high Short interest tend to see their share price fall as the weight of bets on the downside overpower any bullish moves upwards. It’s like having big daddy sit on your chest. Try and get up. Tough isn’t it?

Here’s a few Short interest charts to cast your eyes over along with the corresponding Share price performance.

Take Tullow for example… As you can see from the two charts, the short pressure takes its toll on the share price. It’s not always an exact science as sometimes the bullish investors can fight back altering the share price performance despite the shorts remaining the same.

Tullow1 TLW

Then look at Providence Resources (PVR). This stock does not have high liquidity so can move strongly on lower volumes. That said – the two charts provide a decent insight into how ‘short interest’ can be watched and used as a guide to determine potential buying opportunities. It’s never 100% certain but investors could do far worse than check out this kind of data on stocks they hold or plan to buy or sell.

PVR1 PVR

Last example is Bowleven (BLVN).

This stock traded abnormally high volume on Friday @ 22 million shares. The average is nearer to 7 million.

Just look at the huge drop in shorts interest on the chart below. Hence, as they buy back stock, the share price rises. However, the stock has taken it’s time to bounce back which suggests that those closing the shorts have done so successfully and with some control. Buyers might have been absent or TA followers simply watching for confirmation signals before joining in and adding the extra volume/weight to the moves.

The share price performance chart on the right suggests that a ‘balance’ might be achieved at around 83p to 85p ranges.

With a closing price on Friday of 74p, the correction or balance looks like it has some way to go.

That said – nothing is guaranteed in today’s markets and new short positions might be at the ready to counter such moves. One thing is sure, the shorts certainly covered or closed at the right time.

BLVN2 BLVN

And that appears to be the story across many E&P’s of late. Perhaps 2013 is the year where higher risk stocks come back into play.

If you want to check out short interest on the stocks you hold or the hotlist picks etc – follow the link below and see the chart field box at the bottom right end of the site.

http://www.efinancialnews.com/assetmanagement?mod=mainnav

Good luck with your investing/trading/research.

TheShareHub accepts no responsibility for any external sourced data from other sites. Information should be verified with the respected site.

NEW Poll up and running – Oil&Gas Law

We are getting towards the sharp end of the Baghdad / Kurdistan Oil & Gas law discussions which started as early as Jan 2011. Originally they had expected to conclude the law by June 30th of this year. But as many will recall during the elections – politics in Iraq is far from simple.

CEO’s Tony Hayward of Vallares/Genel and Todd Kozel of Gulf Keystone both recently implied that they thought a successful conclusion to the Oil & Gas law would come this year. But they would say that wouldn’t they!

The passing of an Oil & Gas law will be of major importance to companies operating in Kurdistan but more importantly – it will be huge for the Iraqi people as a whole, who deserve a more decisive and cooperative government looking after ‘their’ interests.

The poll ends on Sept 30th – so vote away.

The poll is positioned bottom right of the screen.

Best Broker/Online Dealing – based on Customer Service CLOSED

Well done to iii (interactive investor) who topped the Best broker/online dealing site POLL which was based purely on Customer Service. Although total votes were 134 which is half of the last poll on (Performance/Reliability) iii have made a clean sweep. TDW was the big faller and perhaps suggests that whilst their platform might be reliable and perform well, their back room and customer service lets them down. More votes comparable to the first poll (277) would have made it more conclusive but it gives a fair representation.

The top five based on CUSTOMER SERVICE came in as follows:

1. Interactive Investor 26 votes 19% of POLL
2. Hargreaves Lansdown 21 votes 16% of POLL
3. Barclays Stockbrokers 19 votes 14% of POLL
4. Halifax Stockbrokers 17 votes 13% of POLL
5. TD Waterhouse 16 votes 12% of POLL

The top five based on previous POLL on RELIABILITY AND PERFORMANCE came in as follows:

1. Interactive Investor 42 votes 15% of POLL
2. TD Waterhouse 40 votes 14% of POLL
3. Hargreaves Lansdown 39 votes 14% of POLL
4. Barclays Stockbrokers 34 votes 12% of POLL
5. Halifax Stockbrokers 34 votes 12% of POLL

Best broker or online dealing site POLL closed.

Well done to iii (interactive investor) who topped the Best broker/online dealing site POLL which was based purely on Performance/Reliability. It was a close call with the top 3 being within just 3 votes of each other from a total of 277 votes cast.

The top five came in as follows:

1. Interactive Investor 42 votes 15% of POLL
2. TD Waterhouse 40 votes 14% of POLL
3. Hargreaves Lansdown 39 votes 14% of POLL
4. Barclays Stockbrokers 34 votes 12% of POLL
5. Halifax Stockbrokers 34 votes 12% of POLL

The next POLL (live from today for 2 weeks, see right hand column) is purely about “Customer Service”. As mentioned before, the above POLL dealt with ‘performance/reliability’ which was more about the ‘access’ and ‘stability’ of the service. In the past investors have been ‘shut out’ from dealing online due to technical issues which often arise at times when volatility is at its highest.

But what happens when the site does go down? Can you get through on the phone? Is the customer service any good at resolving your queries or problems? Does it take minutes, hours or days for your broker to answer an online enquiry? Problem with your account? Do they deliver the customer service that you expect?

It’s great to have a stable platform to trade on or a reliable broker to call, but it’s useless if your account has been frozen or money hasn’t been transferred in (or out) when you requested it. The ‘back room’ is just as important as the front desk.

So here’s your chance to vote again for your best broker/online service based purely on CUSTOMER SERVICE. It will be interesting to see if any of the top five change position.

Happy voting. POLL closes on September 20th.

Best Brokers and share dealing sites 2011

The recent market volatility has tested a few pi’s patience when it comes to their trading accounts or brokers. As we all know – speed is of the essence and delays on the phone to a broker can cost thousands. Online trading reliability is crucial to more active investors/traders and many have complained recently of poor service, websites down and terrible customer service.

So who are the best Brokers and share dealing sites? Thesharehub with up to 10,000 visits per day has created two polls based on the most popular brokers/share dealing sites. The first poll is based on Performance/Reliability/ and not ‘customer service’ which includes account enquiries, time waiting on the phone and usual customer management. A second poll will be done specifically on Customer Service. Whilst a broker might be the best at getting the best price for you – it counts for nothing if it takes you 20mins to get the trade dealt due to poor customer service.

It would great if you could take the time to vote for your preferred Broker / dealing site. See POLL positioned in the right hand column, near the bottom. Poll Expires on Sept 5th.

An alternative POLL based specifically on CFD and Spread betting services will be done in September.

Advanced apologies to all international investors/readers as the POLL is aimed at sites/brokers that are UK centric.

Please leave broker/online dealing site additional opinions/comments on this post/thread. Your chance to name and shame or hero your chosen trading site/broker.