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I am always curious to go back and have a look at price and volume action after there has been some takeover activity.
So I am having a look at ASX and the action before the takeover announcement firstly and then what took place after.
First to the pre takeover chart – because with ProfitSource we can go back in time!
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We can see that the price was rising with decreasing volume – but then the ASX was really only following the overall market trend in respect of both price and volume. And in a way when you take the short term outlook, the ASX has underperformed in the overall market:
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But I want you to take harder look at the day prior to the takeover bid – that is Friday October 22 - in the first chart. That day the price gapped up with a huge increase in volume. Why did it gap up in a weak market? When you look at volume, one may say that if there was prior knowledge then it was not widespread, as it was not a huge volume on the Friday.
Now I am not for one moment suggesting there was anything untoward happening – I am merely looking at the market action which could have been normal.
Let’s now look at post-bid price action:
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So what we see is a spike up on very a large volume on the Monday – the lemmings turned up in their thousands – and that includes the Instos. And some bought at $44 only to find their buys had lost 10% on the Tuesday and more on Wednesday.
If you look at the volume you will also note that more were bailing out on Tuesday than were buying in on Monday.
Whether the Singapore bid gets up remains to be seen – but this short term stuff is no better than roulette – unless you are really skilled.
The best way to view this sort of market action is from the sidelines – without attachment!
Enjoy the ride
Tom Scollon
Chief Analyst |