THT (Thorntons) issued its trading statement today, stating:
Thorntons announces that its UK Commercial channel within its FMCG division has faced challenges which have adversely affected its sales performance in the run up to Christmas. Meanwhile, the Retail division is currently experiencing like-for-like sales growth. Against a strong comparative period last year, the Board now anticipates a decline in sales in the UK Commercial channel for the second quarter of the current financial year. The Board now expects earnings for the full year to be below those achieved for the last financial year.
Shares slumped 23% to around 91p.
I sold my shares on 13 October at around 91p when the trading statement reported a decline in sales. The shares were down 6% on the announcement. I decided to bail at that time. Imagine my disappointment when the shares rose to around 128p.
Investment is a funny old game. Sometimes it takes a while before your theories play out.
If I had been smarter, I would have sold out at 125p in May, when the share price crossed the 200 day moving average, as indicated in the following chart from Stockopedia:
At that point, it would have been reasonable to conclude that the momentum game was up, and it was time to move on. The signal isn’t perfect, of course. What signal is?
However, it does seem a fairly good signal. I had thought about the 50dMA, but I think it has the danger of too much whipsawing.
What do readers think? Do you have a favourite signal for closing a trade?
I must emphasise that I am a newbie to momentum investing and technical analysis, so you should take everything I say with a pinch of salt.
Where next for THT? Well, the shares could make a quick recovery, for sure, but I think that when you see a significant gap down like that, the odds are against you. A PE of 10 is hardly demanding, but remember, those analyst estimates are going to have to be revised downwards. THT has a Stockopedia value rank of 72, which is OK, but not compelling. Its momentum rank is 73. Same deal. I can’t imagine that the momentum boys would be interested in this share. It’s gone nowhere for six months. It may be of interest to value players, but I’ve seen plenty of value shares drift, go nowhere, and even fall further.
I’m not tempted myself. BWTFDIK.