My post Oct 27, 2016, identified five impulsive moves in the past 12 months which could have yielded worthwhile capital gains in-spite of the share-price being locked in a trading range between $5 and $6.
Retail investors will pay a premium for income stocks, and there is no doubting the value of franked dividends to retirees. Few however are willing to harvest capital gains when on offer, because they are reluctant to pay capital gains tax on their profits, or do not trust their judgement to follow a profitable strategy.
The profit locked in by selling a portion of one’s shareholding may well exceed the dividend the company pays, even after allowing for capital gains tax.
This chart shows how important it is for those who wish to trade a range to wait for technical evidence of an impulsive move before entering. The $5 support level did not hold and the share-price has fallen to a low of $4.41 before starting to rebound.
The green arrow on this chart marks a bullish engulfing pattern completed 03/11/16. This has been followed today (04/11/16) by a second day of gains. Engulfing patterns at the end of a sequence of falls or gains are often helpful alerts for traders, warning of a change in trend.
Technical confirmation of an evolving impulsive move is seen when a sequence of unidirectional trading candlesticks follows a day(s) of large range trading.
Traders hoping to profit from a prompt reversal of company fortunes must take into account the likelihood that recovery will be incomplete and much more protracted.
Readers are cautioned not to rely on technical analysis alone, and to always seek professional guidance before investing.