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I'm thinking that there is probably a profitable edge in trading some of these atypical (above average) price spikes that form after news.

Take AAD for an example, huge fall in price, but a few FA people comment that the reported results don't seem to be that bad.

If they're right (key assumption), then the price has been oversold, demand should force the price up once the panic sellers are done.

This strategy will require a unique skillset;
(i) the ability to correctly analyse a report on the day it's released (disappointment due to random/temporary event or part of bigger problem)
(ii) the ability to frame a profitable risk:reward setup
(iii) appropriate position sizing for the number of opportunites (may not be many)

This concept of trading a personal opinion of the news reminds me of the great thread done by skc many moons ago.

aad1811.PNG
 
peter2 said:
I'm thinking that there is probably a profitable edge in trading some of these atypical (above average) price spikes that form after news.

Take AAD for an example, huge fall in price, but a few FA people comment that the reported results don't seem to be that bad.

If they're right (key assumption), then the price has been oversold, demand should force the price up once the panic sellers are done.

This strategy will require a unique skillset;
(i) the ability to correctly analyse a report on the day it's released (disappointment due to random/temporary event or part of bigger problem)
(ii) the ability to frame a profitable risk:reward setup
(iii) appropriate position sizing for the number of opportunites (may not be many)

This concept of trading a personal opinion of the news reminds me of the great thread done by skc many moons ago.
Click to expand...

That's a major part of my trading these days. Tradings reports, news, AGM updates etc.
Some examples of stocks that I traded in the past few days:
- QBE... weak 3rd quarter update in presentation. Price opened pretty flat. Low risk short.
- AGI... weak AGM update. Price open flat. Easy short.
- IPL ... Good news in cost saving on new gas deal. Price open flat. No brainer buy.

Yes one needs the ability to read the report quickly and correctly... and one also need to have the resources / research available to compare the news to expectations. More importantly, you need a market that hasn't quite catch on - as illustrated by the "price open flat" comment. If QBE gapped down 3%, then you got to be doubly sure about your interpretation, and you have got much worse R:R.

Some examples where the trade didn't quite work out.
- ORI... weak outlook statement. Price open some what flat. I went short but was quickly stopped out.
- GMG... update "reaffirm" outlook. Price open flat. I didn't think it would make a difference but it ran 4%.
- SGF... great acquisition. Price gapped up 15%. I didn't want to chase the gap and looked for some reversal. Turned out the open was the low of the day.

Sometimes you can also combine TA with news. Take AST for example... report out and it was a great beat on expectations. The chart before the news showed shallow retracement after a good run. A stop buy @ say $1.45 would still give you good profits, albeit not as good an R:R if you bought the open.
Capture.JPG

One other thing to remember is that these stocks are at bigger end of the market. So while the 4% move isn't that large, the actual amount of profit is still very healthy with a large position size.

Then you keep it on your watch list for day 2 follow through or reversals.
 
Does anyone know what's happening with Ardent Leisure? They seem to be on a roller coaster since their results. Down over 10% in the last 3 days with no real news.




skc said:
That's a major part of my trading these days. Tradings reports, news, AGM updates etc.
Some examples of stocks that I traded in the past few days:
- QBE... weak 3rd quarter update in presentation. Price opened pretty flat. Low risk short.
- AGI... weak AGM update. Price open flat. Easy short.
- IPL ... Good news in cost saving on new gas deal. Price open flat. No brainer buy.

Yes one needs the ability to read the report quickly and correctly... and one also need to have the resources / research available to compare the news to expectations. More importantly, you need a market that hasn't quite catch on - as illustrated by the "price open flat" comment. If QBE gapped down 3%, then you got to be doubly sure about your interpretation, and you have got much worse R:R.

Some examples where the trade didn't quite work out.
- ORI... weak outlook statement. Price open some what flat. I went short but was quickly stopped out.
- GMG... update "reaffirm" outlook. Price open flat. I didn't think it would make a difference but it ran 4%.
- SGF... great acquisition. Price gapped up 15%. I didn't want to chase the gap and looked for some reversal. Turned out the open was the low of the day.

Sometimes you can also combine TA with news. Take AST for example... report out and it was a great beat on expectations. The chart before the news showed shallow retracement after a good run. A stop buy @ say $1.45 would still give you good profits, albeit not as good an R:R if you bought the open.
View attachment 65044

One other thing to remember is that these stocks are at bigger end of the market. So while the 4% move isn't that large, the actual amount of profit is still very healthy with a large position size.

Then you keep it on your watch list for day 2 follow through or reversals.
Click to expand...
 
The market has reacted well to the announcement that Ardent are looking to offload the d'Abora marinas. Although only a small segment of the overall portfolio, they are the most profitable business. It seems a bit sad to be selling off a cash cow to free up capital when in my opinion it is the gym/heath club business they should be running away from.
 
Any thoughts on the tragedy and how it will impact valuation?

I note that their theme parks (which includes WhiteWater world and Skypoint) only represent approx 27% of EBIT and 15% of revenue. There are more severe risks at play though of course than a downturn in themepark attendance including total lose of license and massive fine from health and safety regulators.

Will be interesting to see how the market reacts today, but strong support at $2.
 
This is the worst theme park tragedy in Australia's history and it happened at the worst possible time, in the lead up to the Christmas school holidays. It's impossible to know how significant the loss of public confidence in theme parks will be as a result of this tragic incident, but it will definitely be felt on the Gold Coast this summer.

The market depth looks bad for AAD today. It looks to be a case of stand back and get out of the way and see where the bottom is.
 
Feel for the kids, horrible.

Owned these a year and a half ago and sold, can't remember why now.

Risk is ever present in the share market. Look at BHP also. Lucks been with me lately.
 
Awful stuff. Just terrible for the families involved.

AAD doesn't have unmanageable debt (first maturity not until August 2018) and could probably take a decent, sustained hit to earnings without losing too much skin. The recent sale of the gyms business was earmarked as capex for the roll out of the Main Event business in the US, but will significantly reduce debt in the interim, ditto the marina business when that is sold. There is a growth premium priced into it at the moment based on the Main Event business in the US, that would have to be under serious threat so can't be good news for the SP. This isn't the first serious incident at Dreamworld, someone got caught in a different conveyor belt earlier this year and almost drowned, and the AWU raised concerns back in 2015 about safety and maintenance.

I don't really follow AAD, so those are just some initial thoughts.:2twocents
 
McLovin said:
Awful stuff. Just terrible for the families involved.

AAD doesn't have unmanageable debt (first maturity not until August 2018) and could probably take a decent, sustained hit to earnings without losing too much skin. The recent sale of the gyms business was earmarked as capex for the roll out of the Main Event business in the US, but will significantly reduce debt in the interim, ditto the marina business when that is sold. There is a growth premium priced into it at the moment based on the Main Event business in the US, that would have to be under serious threat so can't be good news for the SP. This isn't the first serious incident at Dreamworld, someone got caught in a different conveyor belt earlier this year and almost drowned, and the AWU raised concerns back in 2015 about safety and maintenance.

I don't really follow AAD, so those are just some initial thoughts.:2twocents
Click to expand...

Tragedy indeed. I had an annual pass last year and took my kids there on several occasions. I never thought a seemingly relaxed ride can cause such terrible loss of life. RIP to the victims.

Re AAD itself. In pure accounting numbers, the worst case reduction in P&L is probably priced in. The share price fall of some 30% while DreamWorld itself earned no more than that percent. The attendance will fall and stay low for some time - but it will recover in due course. It feels like the share price has fallen enough even if the theme park division is to shut forever.

However... this all assumes that the share price ~$3 is somehow "correct". AAD was trading at around $1.80-$2.00 as recently as July. Sure they sold the troublesome health clubs at a premium to where the market priced it... but the proceeds are going towards Main Event. I am not a fan of Main Event at all. It feels like a glamourised bowling arcade that is completely discretionary consumption. It has high capex and long payback period, but might actually age quite quickly. IMO the market got over excited on the prospect of short term top line growth. If AAD was trading around $2 last week before this tragic incident I wouldn't think it's a huge bargain or anything as such.
 
skc said:
Tragedy indeed. I had an annual pass last year and took my kids there on several occasions. I never thought a seemingly relaxed ride can cause such terrible loss of life. RIP to the victims.

Re AAD itself. In pure accounting numbers, the worst case reduction in P&L is probably priced in. The share price fall of some 30% while DreamWorld itself earned no more than that percent. The attendance will fall and stay low for some time - but it will recover in due course. It feels like the share price has fallen enough even if the theme park division is to shut forever.

However... this all assumes that the share price ~$3 is somehow "correct". AAD was trading at around $1.80-$2.00 as recently as July. Sure they sold the troublesome health clubs at a premium to where the market priced it... but the proceeds are going towards Main Event. I am not a fan of Main Event at all. It feels like a glamourised bowling arcade that is completely discretionary consumption. It has high capex and long payback period, but might actually age quite quickly. IMO the market got over excited on the prospect of short term top line growth. If AAD was trading around $2 last week before this tragic incident I wouldn't think it's a huge bargain or anything as such.
Click to expand...

Thanks for the insight skc. That certainly makes sense
 
Seems to be settling down just below $2.
I thought you were pretty right SKC. I think the price should drop a bit more realistically.
 
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