Lots of events can cause a big and sudden move in a single ASX200 stock, perhaps less so in an ASX20 or ASX50 stock. I’m not talking about events that move all stocks like the beginning of WW3, but only events that affect a single stock.
There are events that will move a stock that will gap way above your stop for a short trade, or gap way below your stop for a long trade. That is, with a DMA CFD account, which don’t have guaranteed stops, your loss could become a lot bigger than you imagined. Alternatively, if you are on the correct side of a big move, your profit could be a lot bigger than you dreamed.
AQA is a stock on my watch list, but not one that I have held. Looking back at AQA’s chart, you will notice that the chart indicators were heading to a long trade open on 4-May-2014, but the chart was not quite there yet. Alternatively, a trader may have shorted AQA on 14-Apr-2014, but not closed the trade by 4-May-2014 as the chart was not yet oversold.
Then the big kaboom on 5-May-2014, glad I was not short. The huge AQA sp rise on 5-May was due to a possible takeover announcement, which unless you are on the inside, or intimately involved with every move of AQA perhaps, you could have not foretold.
Now, what can cause a big kaboom to the downside, excluding really odd events. Well announcement, or rumour, of a capital raising can have this effect because in order to entice investors to participate in a capital raising, the new stock needs to be offered at a significant discount to the current sp. ORG is in this scenario as discussed here, plus there is a presentation regarding the Browse Basin on Origin’s website.
This time luck has been on my side as I shorted ORG on 16-May, and the ORG sp has had a significant fall over the last three days. I shorted ORG on 16-May because at the time I was building a quiver of shorts in anticipation of a global market rollover, meltdown, transition to a bear market, or perhaps just a major dip, but not a correction … not one of those. The reason I chose ORG to short at that time is very simple, RSI had passed through 70 and was trending down, and the MACD had crossed. This is a proven strategy, which if it was my only strategy would pay out over time. The only issue over the last 4 months is that very few golden technical opportunities have presented. Hence, I have experimented a lot. Maybe I will take advice from Katoom, refer to Post #: 428549, and start trading the US markets as many more golden technical opportunities present without the need for experimental trading techniques.
