Selling an Aussie Icon
On the day before Australia day I did a terribly patriotic thing (not). I sold my entire position in Qantas for $4.02. After brokerage, I came to a net loss of $20. As I write this article, 2 days later, the stock is trading at $4.07 and could go higher over the next few weeks. (edit: I started writing this article on 27 Jan 2006 but only managed to finish it now - months later. QAN has continued to struggle to venture much beyond $4 and now, as I finish the article, it’s trading at $3.90) So why did I sell my position?
As mentioned in my previous article about QAN, I bought the stock when I knew nothing about trading or investing back in 2002. I watched the price tumble to go below $2 due to the fact that I didn’t have a stop loss in place. This was a stock I really wanted to get rid of.
So what has taken me so long to close my position, and why have I closed it with the potential the stock might rise further?
For starters I wanted the capital to invest elsewhere. Sure, I could have held on, but why hold on to something that might make 20% in a year when there are stocks that could make 200% in a year (or two)?
When you consider the stellar run the market has had last year (and so far this year), QAN has been rather stagnate. Part of this can be attributed to the rise in oil prices and the threat of losing monopoly routes, but whatever the reason is I must force myself to analyse this technically and not emotionally.
The clincher for me was there’s been no significant increase in volume accompanying any breakouts. If a stock is going to do something big, you’ll see a large jump in volume prior to the real big price movement. With QAN, when you ignore the volume jump that occurred when British Airways sold their holdings, there weren’t any significant jumps in volume. There was no ‘buzz’.
Remember: Always look for a significant jump in volume to confirm your prediction that a stock is ready to break out or break down.
