Wednesday, 25 April 2012

Kepcorp - a small punt for a very small bounce

 2 posts ago( Kepcorp gets bog mojo from Brasil) ,    I dumped my Kepcorp wrts immediately on waking up to good news that Kepcorp  had received its biggest oil rig contract to date...

While mainstream technical analysts are rushing to upgrade their technical targets on Kepcorp to >$12+ following this news , I dumped my kepcorp.. see below for an example of such an upgrade from a local technical analyst who apparently got sucked into the euphoria in his technical analysis  :
For those who emailed me for the reasons why I dumped immediately upon such good news , I gave a few : 

Question 5: why did I choose to dump as soon as I woke up to the news of the deal while mainstream media technical analysts are rushing to  upgrade their  technical targets for kepcorp to  > $12++. following  this news  ?
Ans:  I assume rightly or wrongly that many insiders have collected a lot of kepcorp stock on credit in anticipation of this very moment of announcement .  They have to dump on the news because (i) they are on credit and have no reason to hold forever (ii) maybe  they do not expect any more good deals of such size to be announced anytime soon ..(iii)  those outsiders who bought on contra just before the deal announcement ( like me) and those outsiders who bought on contra on the day after the announcement will have to dump when  forced selling day comes. (iv) the dow can turn awry anytime , in fact I expected the dow to turn bad that very same Friday nite  , which it did down 1% so what is the point of holding on esp over a weekend   (v) lastly , kepcorp has hit close to my technical target which is $11.66 from  which i expect a  a strong downward reaction or fall .

True  to form , Kepcorp went up slightly ( 4c up) to 11.68 for 1 day after I dumped before it plunged to a low of 11.05 today  ( see chart below)  not withstanding a tax-exempt dividend of 26c awarded yesterday nite .

Today I saw that Kepcorp had plunged ferociously  "enough" for the moment  and it was time for a small bounce ( strictly yesterday was a much better entry with the 26c dividend , so I am being late here in my entry today )   so  anyway I accumulated 300 Kepcorp wrts for an average price of 13.4c, which happens to be exactly the average price of the 700 lots I bought just hours before the announcement of the super deal 10 trading  days ago and subsequently sold for 16c the very next morning for a profit of $18k  ( see last post for contra statement )  . 

If I had fallen in love with Kepcorp over that superdeal news and held on to my wrts for 10 trading days til now  - it would be all for nought( ie. 13.4c stays 13.4c over 10 trading days as if the big oil rig contract announcement and 26c dividend didn't exist) .

Am I expecting another gap up tomorrow to 16.8c like that day of the superdeal ? No,  I expect the US markets to go up  slightly tonite on yet another blow out quarter from Apple ( announced last nite after US market close ) so that gave me an idea or motivation to punt for  a very small bounce tomorrow to earn some shopping money  just enough to buy an ipad3 or two   . 

Tomorrow ,  I will dump two thirds of my wrts as soon as Kepcorp hits 11.20-25 and one third  at 11.35 if it comes my way. 

Of course if   Kepcorp price action over next few days  does not conform to what I expected, I will react accordingly including cut-loss if necessary.

1 comment:

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