AVZ (ASX) Running discussion on SP

Originally posted by donegaldemon: ↑

I think yesterday trading was a perfect storm for AVZ to have a big retrace .
1. For starters i reckon the sp was over extended and was due a retrace or consolidation .
2. As someone stated above there may have been quite a few T2s buying up on the Friday in hope if news coming out of DRC on ML as we had that article from the DRC last week which more or less cements the mining license in place , id say quite a few thought that that would trigger the license approval .
3. And most importantly i think the biggest reason for the selling was the increase in leverage on AVZ in margin lending accounts .So if yous recall a few months ago the likes of IG and a few other brokers had ceased CFD trading on various stocks due to new rules introduced by ASIC , AVZ was on that list . I clearly remember quite a few on here complaining that they had to close their account and reopen with other CFD brokers , and one of them was Invast .I have an account with Invast and own a parcel of AVZ on leverage and i got a call last week from them stating that the margin on AVZ would be rising from 10% to 35% on Monday 8th , yesterday , the reason for this is that their risk department were weary of the high exposure they had to AVZ , meaning there were many accounts fully loaded on AVZ on margin !!!!!! . So if someone owned a few million shares on AVZ on Friday and they had their initial exposure at say around 50_60% leaving a 40% buffer , on Monday with the new margin requirements their margin would jump to close to 100% thus resulting in a margin call !! add in a pull back of a few pips and all hell breaks loose as punters have to start selling or else deposit more money into their accounts to prevent a margin call and believe me, traders are all over this , AVZ would have been ripe for a shorting yesterday as you can bet your granny that the retail punters thought this was going to a dollar next week and they would have been loaded to the eyeballs on margin .This in my opinion was the reason for the clueless childlike selling yesterday , i watched it all day and they couldnt wait to get out , if it was pro money selling then they could have drip fed the bid and slowly exited at a much higher price as there were plenty of buyers in there abd the stock did want to push higher , but panic set in .
Anyway thats just my 2 cents worth , another day or of pain maybe and then on we go again , Cantor Fitzgerald presenting AVZ to their US customers on Thursday and word on the street is we are announced on the MSCI rebalance on Friday !! this will be great exposure for our little company .
Cheers .

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That was an interesting and informative opinion on what may have occurred with regard to the large sell off yesterday

It gave me an insight on how the margin system operates and revealed something about the mindset of both those providing the facility and those utilising the system to invest

Thanks for posting

Cheers
Nut