This stock has been in a general downtrend since November 2015. The market reaction to “Brexit” in late June 2016 is clearly visible. A potential triple bottom may have formed, which suggest a bullish move could be just over the horizon.
Long Daily Chart
The long daily chart shows LAND to be a stock that rocks back and forth inside its price channel (set here to ±5% of the 22-day EMA) in a fairly predictable manner. Reversals tend to be preceded by a string of up-and-down candlesticks or a large move in one direction followed by a sustained reversal. Support and resistance lines are generally areas of congestion rather than hard points, although there are a few support and resistance lines that price has bounced off of fairly reliably. One such point arguably lurks at ~963p, just below LAND’s current close price of 1004p. Volume lately has been roughly where it has been for the past 500 trading days. The most recent downtrend I’ve identified (using linear regression ±1.96 standard errors) has been tested twice at its lower bound.
Short Daily Chart
A bearish divergence of sorts has formed between Force index and price. I also note that MACD histogram has ticked down. In light of the recent downtrend, I interpret MACD’s downtick as heralding a resumption of price declines. If the trend continues, I expect the price to halt its decline temporarily in the mid-940s. If the trend does not continue and a reversal occurs, which is possible given the bullish divergence between MACD histogram and price that has formed from around mid-September to present, and the potential triple bottom that has formed, I expect price to decline to somewhere in the mid-980s before reversing. I’ve indicated that point with a blue dotted line.
On the strength of the recent trend, the downtick in MACD histogram, the bearish divergence in Force Index, and this stock’s tendency to change its overall momentum slowly, I will short this stock at its open on 27.10.16. I will set my initial stop price at 1077.63p and I will provisionally place a limit order to cover my position at 963p.
Entry: I shorted this stock on 27.10.16 at 1000p (£10.00).
Price has halted at 985p, roughly where I thought it might. The day’s candle suggests a potential bullish morning star. I will watch what happens at tomorrow’s open closely. I will regard a gap up and movement above 995p to be grounds for covering my position.
Exit – 28.Oct.2016
The reversal I had feared yesterday did not materialize (Edit: did not materialize until later in the day). LAND’s price declined rapidly and hit my limit order minutes after the opening bell this morning. I covered this position at 963.00p for a gross return of +3.70%.
Market indecision in the direction of this stock’s price has characterized the week of trading that has gone by since I covered my position. My exit looks well timed. I am pleased with how I managed this trade. I followed my strategy exactly and the stock did what I thought it would for as long as I needed it to in order for me to walk away with a modest profit.