On the first trading day of 2009, 2 January, the FTSE 100 closed at 4,562. This was up 24.5% from the low of 3,665 two months earlier on 27 October 2008.
The 6 January saw the highest traded point that half 2009, with the FTSE 100 plumbing a fresh low of 3,463 on 9 March – a 24.1% slide.
It then closed the year at 5,932 – surging 71.3%! That’s a lot of volatility for one year.
Many tend to believe that markets trend in one direction consistently, either up or down. The reality is that the market is choppy, and many of the market’s best days and rallies come in bear markets.
This could be the beginnings of the early bull stage, but that doesn’t mean we can’t see a 20% slide in equities. The vast majority stocks are flying at the moment, with all sorts of dogs being taken out for a walk. It is the type of market where you can pick a random stock and probably make money just by the virtue of being long, and whilst it is incredibly fun it does promulgate the idea that one is a good trader in a market and not a trader in a good market.
It also breeds complacency, as both traders and investors become accustomed to a rising market, and begin to forget about risk management, stop control, and exit plans.
The market isn’t as fun as when stocks were in freefall a few weeks ago, but for the active trader there are many opportunities to get involved in swing trades.
The cup and handle we have talked about in my recent articles continue to be my go-to pattern of choice. Lots of stocks are forming bowly bottoms, where we see the price begin to curve upwards.
Senior plc
Here’s one I bought a few days ago:
I don’t know what Senior does, but the company announced a “Financing Update” which spoke about covenant relaxations and the phrase “sufficient liquidity under existing committed facilities”.
It provided certainty to the market, which has been a key driver of stock prices in recent months. After many equity placings, stocks rise. Once the issue of funding or potential dilution is removed, the stock is then free to rally without the shackles of…
