Trading Diary

Trading Diary – 28 February 2020

The fears related to the COVID-19 virus have continued unabated, and as a result, a further 4 of our stock positions have tripped sell rules. Following these transactions, we now hold 11 stocks in our Model Portfolio and have 39% allocation to cash. 

The trend of the overall market has now turned negative. Our cash allocation will not be reallocated into the market until the trend becomes positive again. 


Kathmandu (KMD)

Sold with a 2% loss. 

The company sells adventure travel clothing and equipment under the Kathmandu banner, as well as surfwear, under the newly acquired Rip Curl brand. Both businesses will be severely affected by any further escalation in the outbreak of the COVID-19 virus. Consumers will likely curb overseas travel, which will have a flow-on effect to the Kathmandu business. Foot traffic to stores and general consumer confidence will take a beating should the virus become widespread in Australia. 

The market in the stock is reflecting this change in sentiment. The stock has retraced back through the gap-up that occurred on the day the company released 1H20. The stock has also now fallen below crucial moving averages. As a result, we’ve exited our position for the time being.

EML Payments (EML)

Sold with a 30% loss. 

The stock has been in free-fall since releasing 1H20 results on the 19th of February and has now fallen 35% over the two weeks. Under more normal circumstances, the selling climax would subside more quickly.  However, with the current state of the overall market, support for the stock has not emerged. 

The stock has easily blown through crucial support levels and moving averages. Institutional support for the stock appears to have all but disappeared at this point. With the uptrend broken, we’ve exited our position in the company. 

Austal (ASB)

Sold with a 30% profit.

We bought ASB as it was breaking to new all-time highs in May 2019 after emerging from a 2-year trading range. The uptrend continued for four months before topping out in September and entering a new trading range. This range displayed numerous signs of being a reaccumulation range — the above-average volume on up weeks and more subdued volume during the down waves.  

However, the stock has now breached the lower limit of this trading range as well as crucial moving averages. Support has not re-emerged and therefore, we’ve sold and moved to the sidelines for the time being.  

Collins Foods (CKF)

Sold with a 3% profit.

CKF has fallen below key moving averages and broken below short term support levels. The company relies on foot traffic through its stores and positive overall consumer sentiment.  In the event of an outbreak of CONVID-19 in Australia, both will be negatively affected. 

Sentiment has changed for the stock, along with the rest of the market. Therefore we’ve taken the opportunity to exit the position until the potential risk of the viral pandemic has dissipated. 

By Danny Sandler

Founder of Ocean Asset Management.