Friday, 5 September 2014

Quindell RSI divergence

I have been following the Quindell saga on ShareProphets, where several allegations remain unanswered, and of course I am aware of GCR's success in unmasking Lets Gowex. My overall position is that I do not want to be long if these things are proven to be true.

However I am not a long-term investor and price/action in the end is what matters for a trader, and QPP is volatile. I had another look at the short-term (H1) chart and it seems to me that the instrument keeps falling back to around 167p (current price at time of writing), making a quick squeeze to 160p, and then shooting up very quickly to 187p. It has done this twice since Aug 25 and we are back now exactly where we were on Sep 2.

Because the dip from 167p to 160p was so quick on both occasions, and I might miss it, I decided to close my short yesterday (for about 8p profit) and sit this out. The risk/reward ratio of, say, setting a limit sell of 162p was not attractive.

Here is the chart showing the fractals, the support, and the speed the instrument snaps back from 160p to 167p. The snapbacks were at market open, the first took an hour, the second one on Sep 2 took 5 minutes. They were not, however, overnight gaps which meant they were tradable.


QPP H1 chart

This however is not the only reason I have closed my short. Looking at the longer view, I discovered something I had not seen before when I checked the RSI(14 days). I found one of the clearest RSI divergences I have seen in a long time.  A case where the price has upper and lower parallel trendlines (tramlines) and the RSI also has tramlines. In fact the RSI has four touches on the topside and two on the bottom.

This is rare, RSI divergences are normally only a single trendline. And even more significantly, they are of similar and in my view material gradient. When I have had to zoom out to about 18 months to show the gradient properly, but I have seen many tops/bottoms called on divergences shallower than this one.


QPP D1 textbook RSI divergence

You can see in the RSI that there is a little bit of room to touch the lower tramline again, and obviously plenty of room in the price chart!). I am therefore thinking of putting a long order in today at, say, 160.5p, the idea being to let it rise, and then set a stop of just under 167p. (see above about the drops being tradable). If it doesn't fill, it doesn't fill, and that's that.

Note that I am only a technical bull here (and I am still anticipating a 7p drop!) not a fundamental bull. Until all these questions about Quindell inter alia paying capital to buy shells instead of paying fees (a clear breach of Ch.10 CA2006 if true) are answered, I cannot see this share rising above 275p, the blue resistance line on my chart. However, that is 65% ahead of where we are now, which I guess would satisfy most people.



2 comments:

  1. Bounced up again this morning but from a lower start so weaker than last time

    ReplyDelete

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