12 weeks to Christmas...Cyprotex

Friday, 5th October 2012 09:50 - by Moosh

Let me start where I finished the last series of blogs - with CRX..

If you remember the share price (SP) rose to a peak of ~6.75p in April 2012 and I pondered the suggestion that the price halted at the upper fair value limit for SP based on the last published earnings-per-share (eps). I was expecting the SP to fall from that high so I waited at least a month from the peak SP to see how low it would go. The SP found a low of 5.125p (midprice) ~15 May 2012. Here were the following trades (totals are after costs) I made since then:

1. 16 May 2012                       BUY 1500 @ 5.15p                           total = £85.14
2. 12 June 2012                     BUY 2000 @ 4.2p                              total = £91.92
3. 25 July 2012                       BUY 1500 @ 5.125p                         total = £82.51
4. 30 July 2012                       SELL 1762 @ 5.62p                          total = £94.30
5. 13 August 2012                 SELL 2892 @ 6p                                total = £168.27

 Total bought      5000 shares for £259.57

Total sold             4654 shares for £262.57

Therefore 346 shares remain, which at 6p, are worth £20.76. including the £3 extra from the total sold, the total return (at 6p) would have been 9.15%, which might be surprising given the amounts of capital used and the time length of the investment. Playing the short term swings in this way over the last few years has yielded 2834 shares to hold long term with all initial capital recouped. So how did I justify the trade timing in this latest short term investment?

1. 16 May 2012                       BUY 5.15p

SP was above the daily cloud but there was the possibility that it was a cloud bounce – it bounced a little before continuing down. Since this was before my volume oscillator (VO) revelation, I just waited till the next support level formed. Hindsight showed the daily VO was downward and still positive, which are both potentially dangerous since there is always the possibility that VO doesn’t change direction to up, which happened here.

2. 12 June 2012                      BUY 4.2p

I noticed major volume at 4.125p and wondered if support was building – considering this was near the lower of the eps-based fair value range, I decided to buy some more.

3. 25 July 2012                        BUY 5.125p

An hourly kumo breakout to the bullish side occurred on 18 June 2012 after the hourly VO crossed up through -1 a few days earlier. After a few weeks of virtually flat price movement on low volume I decided to have one more buy since I hadn’t bought any after the initial kumo breakout in June.

4. 30 July 2012                        SELL 5.65p

The sell price exceeded the 2nd resistance level (R2, pivot point theory) for that day so I decided to claw back the capital from the 4.2p BUY.

5. 13 August 2012                  SELL 6p

After a few weeks of the price flattening out with the daily slow stochastic very overbought by this time and with further buys not appearing to move the SP up any more I decided to recoup the capital from the 5p+ buys to leave the 346 shares remaining, just in case the SP does eventually want to break through 6p resistance. If the SP turns back down again then at least I have capital available for the next oversold-overbought SP swing.

It is still early days using the daily VO indicator but from this example the hourly kumo breakout happened when the daily VO had flattened but not quite fully turned up, at a VO level of -4. It might have been prudent to wait for daily VO to turn up and perhaps approach (or even exceed) zero since a positive VO is considered to be bullish. I have noticed that there is often a cloud breakout from below to above at about the same time as VO goes from negative to positive.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.