Selling retail shareholders short – A chart review of Admedus

AHZ Wk May 2017AHZ Dy May 2017 v2

 

Security selection is easy for traders. Almost any market/security will do. So long as it is moving. Their problem is to determine the direction of movement, capture the trend, and exit before it changes. It may sound easy but it is a task just as hard as the one confronting investors in selecting winners without the “dogs” for their investment portfolio, from the more than  2,200 stocks listed on the ASX.

Technical Analysis, so helpful for traders, may result in some emerging stocks being over-looked. Admedus for example, is a Health Care Supplier with the potential it would seem, to out-perform in the years to come, but the chart is distinctly bearish devoid of any bullish features, having been in a long-term down-trend, and now moving sideways close to its  historic lows.

The daily chart above shows sparks of interest, ignited by favourable announcements, which have been promptly extinguished by sellers. The most recent spike in the share-price occurred three days before an eagerly anticipated Investor Webinar presentation of the most recent results of the Immunotherapy Division of Admedus on the 4/5/2017.

Professor Ian Fraser’s research and development of vaccines to treat genital herpes and cervical cancer continues to yield positive results, but inexplicably traders promptly sold down the shares. Not only were the recent gains given up, but the share-price continued to slide below the last rights issue at 33 cents, to the recent support level of 28 cents. Today (24/05/2017), this support was penetrated with the closing price 27 cents.

I suspect that it is the short sellers who lead the way. They benefit not only by re-buying their sold stock more cheaply and making a profit, but also as retail shareholders opt out when their stop/loss positions are hit, they can accumulate stock more cheaply, to benefit when the stock-price eventually rebounds.

Short-sellers risk getting it wrong. This will occur if retail-shareholders are no longer willing to sell. Even worse is a sudden trend reversal that sends them scrambling for stock to cover their positions.

Short-selling is for professional traders, not for novice retail investors who may however, take advantage of the low prices, and buy when others are selling.

The trading opinions above are my own. Readers should always seek professional advice about their investment decisions.

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Categories: Chart Review, Trading opinion

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