I am just loving the potential accumulation phase taking place on Coles (COL).
It is very clear to read, perhaps that is because it is a larger cap stock.
Check out the update below and remember price recently sliced lower on the half year report announcement, which had no real surprises, all the info was pretty much already known in the markets, including the fact there would be no dividend announced until the September half (the market was told that the WES dividend would reflect most of the half, which it did, strongly).
And the broker commentary on announcement day was mostly negative, including surprised commentary that "there was no dividend".
This was engineered "bad news" ensuring a 'bad gut feel' for sure.
I marked all the bars since the serious buying came in after announcement, I'll briefly go through them......just for fun.......
1-The first bar I marked saw spread narrow on high volume, as it dipped into fresh new ground and then it closed back up at the days high. There were plenty of sellers (suckers) being drawn out at this point, as seen in the strong volume.
2-Then to confirm the buying, the next bar was UP, as the offer was bought. 'Buy the Offer' is used as a reverse accumulation tactic.
3-Price then dipped lower on good volume, closing back in the top half of the bar, and the next bar was up to confirm the buying.
4-The next bar had below average volume, signalling a combination of No Supply (NS) and No Demand (ND), this is because the market was not about to support a breakout yet - the accumulation was only just beginning -but selling pressure was also light (it was most likely all bought in the previous bar).
5-The next bar was a form of consolidation bar, which drew out low volume. I marked it as No Supply (NS). The firm close shows the market remains positive, and the low volume shows selling pressure has reduced.
6-In response to the reduced selling pressure on the previous bar, price is forced lower, briefly below the lows of the previous Three bars. Volume increases substantially, as the bar threatens the market that price is about to breakdown. But instead of breaking down (miraculously !!) the next bar is up, suggesting there was actually buying on the previous downbar, and it was not about to breakdown at all (doh).
7- The next two bars are up, but with a narrow spread on really low volume, these are marked No Demand (ND). But don't confuse the No Demand with underlying weakness, it isn't true weakness at all, it is just because the market will not support a push higher at this point in time (they still want to accumulate).
8-The next bar is a regular consolidation bar. Kind of like a mini shakeout. Yes, there might have been a little buying in it, but the low volume shows that selling pressure remains low.
9-The next bar is a very narrow spread downbar on really high volume - with the next bar up, which suggests buying. I don't know why the volume increased so much like that, but it did come the day after a price sensitive announcement.
10-The next bar was a high volume push higher, which closed mid bar. This is a classic 'buy the offer' bar, where the offer is seriously bought, then the market is left unsupported, and it falls under its own weight (causing the midbar close).
11-The next three bars drift lower on low volumes, suggesting No Supply (NS). This is probably engineered to appear like weakness emerging and that price may again 'threaten to breakdown', and at the same time it allows more time for 'the offer' to be reloaded.
12-The next bar is an attempt to 'buy the offer' again, but the modest volume drawn out suggests not many sellers were present.
13-So the next bar dips lower in search of more supply. Volume is slightly increased, but spread narrows and the close is midbar. The next bar being up suggests this was buying what supply was present.
14-The next bar is indeed up, it is a proper 'buy the offer' bar on serious volume.
15-Then the next bar is a combination of a No Supply and No Demand . It tries to continue higher on the momentum generated from the previous bar, but the market won't play ball, they are not interested in high prices - they still want more stock - so the move is not supported, and it is again No Demand (ND). And when it dips lower there is no selling pressure (NS).
16-That brings us to today, where price dipped lower, with a much narrower spread, on above average volume, which suggests buying (ER Failure - spread was much narrower that the volume suggests is should have been).
If the opportunity presents, I expect a fairly deep (engineered) shakeout would like to be generated sometime. But I expect it may be to pretty expensive to force outright. So it will likely only occur if the broader market sees some (temporary ??) weakness for whatever reason (probably fake).
I don't expect a true breakout until September, unless there is some overwhelming demand (or over-enthusiasm) for some reason.
As time goes on, and price doesn't really go anywhere, shorter term traders and impatient holders will naturally choose to sell out, which both helps the accumulation, and will also help to clear a path higher, helping if/when the mark up phase begins.
Finally, I should just mention that this accumulation could still fail (for some reason). Yes there appears to be a serious accumulation underway, but positions can quite easily be dumped if required. The intent will become stronger if the accumulation is successfully completed, and the mark up phase begins. Then the commitment to the stock increases substantially, and will see price begin to be defended against supply.
For most short term and swing traders, buying the breakout, or even better the test of a breakout, will offer the least risk.
Longer term traders can certainly accumulate with the potential accumulators right now, but that carries a little more risk at this stage - if for instance, it all fails for some unexpected reason.
(20min delay)
