Quindell - New Technical Analysis

Quindell is a stock that I have a bit of an obsession with. The main reason behind this is that (regardless of having a long position in the stock) Quindell is in a war zone currently between bulls and bears. This stock is so exciting at the moment that I'm seriously considering writing some "cliterature" on the subject.


Now, the subject for today is technical analysis on the stock and how I've had to change my tune in regards to how I look at Quindell. I was the individual who used to post weekly technical analysis updates for Quindell on LSE and anyone who ever saw one of these would know that I used to look at the following indicators: MACD, KDJ, CCI, RSI and volume based candlestick movements.


Many people are now under the impression that technical analysis on the stock is useless, but actually it can still yield useful results, but you have to change how you assess the underlying ground on which the company has been shunted onto:


1. Standard indicators (MACD, CCI, KDJ, etc):

These indicators still seem to be useful if you're trading intra-daily, but otherwise they don't provide the same level of insight that they once used to. There are two reason for this, the first one is that they require a decent level of daily volume in order to be accurate and in the summer volume tends to fall across the board, reducing the accuracy of these indicators on all time frames. The second point is that these indicators have a tendency to become useless when the bid and ask become loaded by shorting influence.


2. Charting:


This is where I believe we can still usefully use technical analysis. Resistance and support levels combined with volume based analysis (my next point) are excellent ways in which we can still try to predict the future using technical analysis.


Let's take Quindell at the moment as an example:


200p throughout the latter half of July was the old support line, with 220p being the main resistance at that point. Currently, we have a major support line at 140p and a minor support line at 160p with the next line of resistance to break being at 180p and from there it will be a pretty quick run up again towards 200p, due to very low volume resistance lines between 180p and 200p


3. Volume:


Volume is a particularly useful thing to watch, because it helps to guide us towards what impact  events have on the underlying sentiment of Quindell. Also, without it we end up in a sticky situation whereby trading slows on tightening spreads (primary traders tighten things up to create volume) and if (like I do) you believe that the short interest in the company is systematically loading up the sell side of the book on occasion, this can cause very fast movements towards to downside.


Further to discussing the merits of looking at the volume, over very positive indicator that can be seen is by analysing the price movements of the following dates: April 22nd, June 11th and August 6th.


When you do this you'll notice that these three days are high volume days but more than this were all days on which a major price fall was seen. Now, obviously high volume doesn't always correlate with a price fall and vice versa, however we can use these three dates as a technical example of changing sentiment:


The important date to look at is August 6th, which was the day Quindell told us that July was a cash positive month. People at their screens on that day will know that the range was huge and that the share price hit 138p prior to closing for the day at 168p. This is known as a positive technical movement and illustrates a "technical change" in volume traded sentiment.


I'm going to conclude this post early rather than let it run on into my personal diatribe on all of the reasons to be bullish on Quindell, but I think that what we can see is that although the ground on which we can apply technical analysis has changed regarding Quindell, we can still find value within it.