- IG move catches some clients out
- Mining royalty specialist's shares are testing resistance levels
- Next staging post could signal more gains to come
Big news in the world of trading: IG is making over 1,000 stocks 100 per cent margin from this Friday. You’d think that all clients would be told at the same time but sadly not – other clients and myself found out last Friday, and an email was only sent out to all clients at 12:38 on Monday.
One ramification of this meant that some clients had informational advantages over others. For example, anyone running a highly-leveraged account could start unwinding positions before the rest of the market, and certainly before any forced selling. Another advantage is going short some of the stocks that are popularly held. Front-running panic selling is a good strategy and in some cases your selling can even mark the merchandise down. This can have the effect of spooking people further.
Whether you wish to employ such strategies is at your own discretion, but it would be naïve to think that it doesn’t go on. It does. Information is always an advantage. Time is a trader’s greatest commodity after their capital. Therefore, it’s a shame that IG has appeared to go against the FCA’s treating customers fairly principle by selectively telling some clients before others. Will anything happen? Probably not. IG says it hasn’t released market sensitive information.
That’s technically true – but if information is deemed market sensitive by other market participants then the line becomes blurred. If I were to tell you that I need capital quickly and I am exiting a position for 1,000,000 shares in a stock that typically trades 10,000 to 20,000 shares a day – and you were to casually mention this to a trusted friend who instead started attacking the price – suddenly that information is market sensitive. This is what has happened at IG en masse.
I have written more about this topic and provided a full list of stocks affected on my website here, but perhaps we are seeing the beginning of the end of the leveraged possibilities we have enjoyed in recent years. The costs to IG are high, and if IG intends to start exiting the market, then it’s unlikely anyone else will pick up the baton. But maybe that’s a good thing. After all, the majority of clients lose money when trading leveraged products.
It’s not only IG that’s having problems, though. Many online platforms are regularly crashing at the first sight of volatility. Israeli copy-trading platform eToro was down for over four hours this week, and Hargreaves Lansdown’s recent troubles have been well reported. Trades are regularly not being filled on commission free brokers – indeed, private investors are finding that fees aren’t everything, and that trust is hard-earned and easily lost when reliability comes into question. A broker in times of need is a broker indeed.
The show must go on, though, and this week my attention has turned to Anglo Pacific (APF), a mining company that is focused on base metals. It has non-operating interests in mining projects globally and for this receives a proportion of the proceeds of these assets. One would be tempted to think of Anglo Pacific as an investment company, but that doesn’t stop the chart from looking attractive.
We can see in Chart 1 that in 2020 the classic warning signs that regular readers of my column should now be able to stop: failure to break new highs, and the stock rolling over along with the moving averages. Anglo Pacific is SETS traded and so exiting this stock is much easier than dealing with a market maker – especially now since some market makers just aren’t answering their phones. Remember, having a broker that picks up in two rings is all well and good – but if the market makers are offering poor prices and won’t answer the phone then the broker is about as much use as a wet towel. Therefore, if you do ever need to exit in a hurry, it’s certainly better to do it on the London Stock Exchange’s flagship platform rather than any of the SETSqx listed stocks. Chart 1 shows a clear line of support at 100p. We can see that the stock has tested and bounced from here four times – proving that 100p is a significant zone of support. Couple that in October 2020 with a clear ramp up in volume as marked by my arrow and we can see it’s obvious that strong buying is stepping in to support the price at this level. That tells us that this is a potential change in trend if buyers are now starting to overpower the sellers.
Moving across to Chart 2, we can see that the stock is now trading above all its moving averages and that the stock is firming and trending upwards. I have marked a line of resistance at 140p as we can see that the stock has hit this level twice now and come off the high. If the stock can take out 140p I think that it’s worth taking a long position to try and capture a move.
I have marked two arrows on the chart as we can see that the pink line (the 200-day exponential moving average, or EMA) has been a price action zone where the price has been both support and resistance. If the price falls below the 200-day EMA then this would suggest the price is not yet ready to move north.
I note that Anglo Pacific has announced an accelerated bookbuild this week (yet to be concluded) in order to raise capital for a cobalt stream acquisition from the Voisey’s Bay mine in Canada. Therefore, there may be some churn in the stock in the coming weeks.
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