Surprisingly, technical analysis saved me

I bought shares in APH (Alliance Pharma) in April 2014 for 33.8p. By the merest stroke of coincidence, I was out at 49.9p yesterday, just in time to avoid its fall of nearly 10% today to 46p. Sometimes you just get lucky like that.

How was I able to do this? Stoplosses! I set a 20% stoploss below the 52w high, which was triggered yesterday. The 52w high is 61.13p, so that would be a stoploss of 48.9p.

It was not a share that I wanted to talk about, as I did not think it had any interest value until today. Here’s my notes from my trading diary: “Sold out at 49.9p, for a 47.6% gain over 19 months. Not bad. Reason: shares in downtrend since Aug and 20% from high stoploss triggered. Revenues flat over 5 years, so I’ve lost interest. ROCE has steadily been declining since 2011. Valuation is reasonable”.

Here’s the chart:

image10

As you can see, there was a massive run-up from Dec 2014 to Aug 2015. Momentum then petered out.

There was a placing today that the market did not take kindly to. I actually wonder if the markets knew about it all along, judging by the chart.

I am being increasingly switched on to the idea of using stoplosses. Although I was not persuing a momentum strategy with APH, I am coming to believe that stoplosses are a crucial component of momentum investing. After all, how else would you know when to get out?

46p

 

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About mcturra2000

Computer programmer living in Scotland.
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