Petropavlovsk: This Is Really a Difficult Market

The shares price of Petropavlovsk (LSE:POG) have gapped down with significant selling pressure. This is a bear market, but the market condition has been very difficult recently. The crucial thing is to pinpoint high probability entries or stay out of this market - as the analysis below would reveal. Every trader may derive gains from their ideas, since your trading ideas can be enhanced if you could gain an insight into where neophytes would like to open orders; and trade against them (a kind of mea culpa on the part of neophytes when they are proven wrong). Actually, this stock is oblivious of your gains or position sizing; including where you plan to smooth your position.

Technical Forecast

When looking at the big picture, this company stock has been trending downwards. The price has gapped down. It is clearly a weak market, and buying would not have been recommended. Technically, 4 Simple Moving Averages are used for this analysis. They are: SMA period 10, SMA period 20, SMA period 50, and SMA period 200. The colors representing the SMAs are highlighted on the top left of the chart below. The SMA 200 shows that the long-term trend is down, as it is also supported by the SMA 50. During this bear’s reign, a short-term rally took place between May 31 and June 15, 2012. This was a threat to the bear’s reign, because the rally was strong enough to make the SMA 20 cross the SMA 50 to the upside; therefore suggesting a possible change in the trend. A ‘buy’ swing signal could have been taken on June 27 and held for several days when a bull candle appeared as the price rested on the SMA 50 (while it essayed to breach that indicator to the downside). Following this, a bogus ‘buy’ signal was generated on July 13, but the price plummeted. Since then, the market has entered a difficult phase.

Another bullish correction started on July 25; which proved to be a trap for buyers (do not forget what I said at the beginning of this article), because personally, there was no rational reason to buy at that time, no matter what the fundamentals were saying. I wonder why anyone would want to buy a weak market when a change in the trend has not been properly confirmed. The current alignment of the SMAs does not support a new order. When this article was being written, the stock was trading at 405.1. There are resistance levels at 405.15 and 405.2, as sellers are trying to force the stock to move towards the support level at 404.5. If the price is taken to the next support level at 404.0, bulls might renew their forlorn battle again the bears. There cannot be logical trading approach if there are no trading plans. The market situation is not sexy at the moment, and I would recommend staying out of this market. Bears can inexorably push down the price with terrific rapacity.

Conclusion: There would soon be a time when the price on Petropavlovsk would be safer to trade. Entering the market at better prices can result in prepossessing moves, but not at this moment.  If the entry rules on this stock are eventually fulfilled, then an order ought to be opened with courage. You will have a better experience irrespective of what happens to that order. Traders love to realize gains as soon as positions are opened, though the gravity of this kind of expectation develops with intriguing feelings. Then, if the market shows any spurious signs of reversal, they would want to cut their profits - in most cases, prematurely.

This article is ended with the quote below:

“Regardless of whether you use indicators or trade from chart patterns; if you are a scalper, a swing trader, or a position trader -- trading for the long-term is the only thing that makes a lot of sense.” - Joe Ross

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Azeez Mustapha

Market Analyst, Trading Signals Provider and Coach

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