ASX closed a tad higher but as I indicated previously, there is an apparent flight to quality happening right now. We see quality stocks like APX, PPS, XRO and NXT doing fairly well this week. On the other hand, like a deleveraging US economy in 2008-2009 removing its excesses, we are witnessing share prices of the smaller cap tech stocks ‘deflating’ to remove and burn its overvaluation that resulted from the tech exuberance of the 2nd half of 2017.
New lows have been registered across once market darlings.
BUD dropped 16.7% to 12.5c after hitting a low of 11c on market capitulation after it revealed that its reseller agreement deal with Telstra fell through.
GSW dropped 5.5% to 43c after receiving a 3rd class action against it [ AFR reported that a successful class action could cost them >$300m according to Squire Patton Boggs- GOD HELP YOU! ].
IXU, the company with the unique data business wonder that has yet to show any buy in from customers, has now closed below 30c , down 3.5% to 27.5c close.
Fatfish (FFG) continued its downtrend to close 3.3c down 2.94%- and I warned about blockchain stocks (see my earlier post)
Brainchip or BRN registered a new low to close at 14.5c down 3.3% despite announcement about having new sales representation in South California.
9SP having a pullball with a 5.7% drop to 4.9c, back below 5c – what an awful chart!
AXP woes continued with a 10% plunge today to a new low of 13.5c after the announcement of its CEO’s resignation just under two weeks ago. Before the announcement it was at 40c, that’s a 66% drop!
Now what do all these stocks share in COMMON?
Look at their charts – sharp downward movements. If you are holder, you have a predicament to decide what to do with them. If you are looking for bargains, you should look elsewhere IMO because you may be buying into falling knives, and there are reasons for their fall.
We sometimes think we are smart to smell a bargain – in reality the market has passed a judgement on these stocks – the VERDICT has been made- and only when a more sustained reversal in the charts occur on the back of evidence of validated fundamentals can you then conclude at that point that the worst may be over. The worse way to lose money is to buy into a falling knife- if you don’t believe me – look at the chart of BLA – the stock fell from $12.30 slightly more than a month ago to $3.65 close today – if you had bought at $6 thinking it was such a bargain, you would have lost close to 50% in just days!
The second thing they have in common is that none of them are profitable and have very low revenues and are in market discovery stage of their business development journey – market is increasingly concerned they may not make it and that is reflected in its share price movement.
Take care when trading in these speculative stocks of yesteryear! The market is awash with great buying opportunities in profit making stocks that are now selling at a lower P/E with validated proven growth track record.
