Long trade entered Friday 29th July 2005

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The system triggered a buy signal on this one today, so I picked up a few at 115p,  this is usually a good kind of chart pattern for a rapid (but often choppy) move upward.

I can remember buying this stock the first time it cleared the 100p level back in 2003, and a very nice profit resulted from that.

This stock is a high risk play, with a wide spread, and lots of punters and day traders participating.

From the chart we can clearly see that those who sold 100p in 2003 before its meteoric rise, would clearly be somewhat depressed, and hence seeing it return to levels that they sold at would likely be tempted back in, this condition is confirmed by steadily increasing volumes over the past weeks.

Whether these are shorts covering or institutional buyers, is largely irrelevant because all that matters is supply is reducing and demand is increasing.

I do feel however for those brave souls who were buying (and holding) during its time spent at over 300p, and their panic exits, combined with greedy short sellers bear raiding all the way down from there, can clearly be seen in the move from 275p too just under 100p.

What I like about this pattern is the speed of the price area between 100p-275p, and usually when prices return into "fast areas" such as these, the action is again fast.  I wouldn't be at all surprised to see this stock trading at either 275p or 50p within a few months or so, so the maths works for me, because a 50% loss weighed up against a 150%+ profit represent good odds, and the 50% loss side of this argument is reduced considerably by addition of a stop loss.

All these things aside, one needs to appreciate that rapid sell offs often occur for a good reason, and it is foolish to disregard the possibility that some bad news could be around the corner.....

With this in mind, my trade here is smaller than usual for me, and my stop loss is wide at  97p