As I do each month, I wrote The Edge Fund wrote letter to investors which includes a number of items. In my ‘Outlook’ item I wrote the following excerpt:
I mentioned in the October letter that the market is “just pulling back from new highs and is at a bit of an inflexion and indecision point”. This has played out in November and my view is that this indecision may continue for a couple more weeks yet.
However, I have reason to be quite optimistic about the next few months ahead and think that we will see increasing signs of positivity between now and Christmas…….
There are a number of factors that comprise my view however I thought I would demonstrate one little signal that is another encouraging sign and one of many reasons to stay optimistic for the time being.
This chart below is a weekly chart of Carsales.com (ASX:CRZ)
What you will notice is the three green circles – One in November 2012, one at end of June 2013 and now a third one at the end of November 2013….. In November 2012 and June 2013, Carsales was the first company to provide a buy signal with my system after a pull back / consolidation period. In both cases, Carsales and then the broader market took off to the upside.
Well this week, Carsales has given a buy signal which was confirmed on Thursday 28/11 which I have taken…… I am starting to get a number of potential buy signals which I will take if confirmed and if so, this will give me more confidence that the next few months will be positive.
In closing, The Edge Fund has used the six week period of weakness in November and December to ‘get set’ for what we think will be a good few months of gains. From there we will probably sell in May and short away.
This article is published by Dean Mico.
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