Square Mile Data
Square Mile Data takes a look at Rockhopper and Avocet Mining this month for potential clues on reading the stock on loan data. Opportunities in trading come along every day of the week so why rush into any particular one that does not look to be a great risk:reward trade-off? At Square Mile Data, we have clients who regularly watch stock on loan activity and then pounce at the most opportune time instead of blithely rushing in. For example, we were recently contacted by a client who had gone short on Avocet Mining (AVM) the night before the recent large drop in price because they had detected a continuing uptrend in stock on loan activity (a potential precursor to bad news as the ‘close to the fire’ funds and traders position themselves) but with the stock price, at that point, unaffected.
Combined with other technical analysis and a good understanding of the company’s fundamentals he went short and, as the graph below pays testimony to, made a rather large sum of money (I’m guessing he’s looking at the Supercar feature in this magazine!). The stock on loan had been increasing from April of this year as you can see below.
Figure 1 - Avocet Mining - Recent Large Drop In Share price
90 www.financial-spread-betting.com | July 2012