Upfront Investor | Wotif Takes a Dive….

If typically on our market one would see a third of the stocks rising, one third tracking sideways and the other third falling, it is clear to see where online bookings company Wotif (WTF) fits in. What most won’t see though is how the stock has been indicating for some time that investors could be in for a wild ride.

Although WTF shares made a convincing break through $6.00 in late 2009 the move was short lived as WTF fell quickly; in just seven months the share price was trading back below $6.00 and continued to fall. What is interesting is how the stock has never really managed to get significant traction and continued to hit its head every time it attempted to break back above the $6.00 level. Unless you are looking at the long term price chart of WTF you would not have been aware how it spent most of the past seven years trading between $4.00 and $6.00 and over the past few months was looking bearish.

That said it was not until an announcement by the company that profits will slide by 20 per cent for the first half, and mention that consumer sentiment is likely to remain soft, that the shares fell over the edge, plummeting around 30 per cent on Wednesday. The important lesson here for investors is to never assume that a well-known brand will be enough to make for a ‘safe’ investment.

So what do we expect in the market?

Late this week some life has finally been pumped into the Australian share market, just in time for Christmas and is a welcome change to the prior weeks in decline. The market experienced a fall of around 7.6 per cent from the previous high at around 5453 points (Point A) in October 2013 to last week’s low at 5037 points (Point B). It was the decision by the US Federal Reserve on Wednesday night to commence tapering the money printing program that was behind the spike. Investors will be pleased to see the move, however it is early days yet, as a day or two up does not confirm the low.

What is interesting is how the move occurred just above a very strong support level for the market at around 5000 points, suggesting it may be turning. That said the strength of the recent dip was on the lower side of my expectations and therefore something to be mindful of. Nonetheless the market still appears bullish overall and therefore we need to assume it will remain so for now, until we have confirmation of a change.

XAO-20-12-13

To your profitable trading,

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’. Dale has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment adviceto traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.