May 2010 Volume 2, Edition 4
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In this edition: • Extract from the PD Global Report - Philip Dooley
CONTACT US FOR A FREE EVALUATION OF YOUR SHARE PORTFOLIO OR TRADING HISTORY Matt.kirk@stonebridgegroup.com.au
• The sky is falling! World stock markets crashing! Global Depression! The end is nigh so start hoarding tins of baked beans!!! - Matt Kirk
Jason.achjian@stonebridgegroup.com.au Philip.dooley@stonebridgegroup.com.au William.chien@stonebridgegroup.com.au
Or call us DIRECTLY (in Aust.) 1300 73 66 11 Outside Australia +617 5504 2222
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• Trading Commodities - CFDs vs Futures - Jason Achjian • Technical Indicator of the Month: Coppock Indicator - Jason Achjian • Recommendation Program update - Commodities Basket Recommendations - William Chien's CFDs - Top Trader - Seasonal Spread Trading
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Extract from the PD Global Report #55 - Philip Dooley
17-May-10
AUD / USD “Opportunity in the Aussie in early April and/or late May” . – March 2nd Whilst the time periods produced by the algorithm back in March are still unfolding and proving correct along the way, I have on two occasions favoured the wrong direction with them, initially at least. 1 April produced a fresh yearly high whereas in March, with the aussie falling I then expected a fresh yearly low by April to be followed by a further low by late May. 2 In April I took the view the rally to April would continue and a further yearly high would be seen by late May rather than a fresh low. Hindsight now shows us that what was unfolding in recent months was not a trending market but a range bound one. This is probably an appropriate moment to go back and read my explanatory note at the top of the PD report (email me if you want the full report) . Late May is a week away and I am expecting support to be in place by months end and a fresh rally to be getting underway by then. Beyond here I have early August. I expect it to rally to August in a continuation of the broader rally and subject to where it settles by late May, that rally to August could take it to a fresh yearly high. If support in late May / early June does not hold then it will fall to a fresh yearly low by August. All I have written since March is noted below. March 2nd: “Opportunity in the Aussie in early April and/or late May. However in the interim there is time available in which to trade into those periods. Whilst there is a broad uptrend in place there has been weakness extending now over several months and I think that warrants those time periods being applied to the downside. Therefore I expect the aussie to be on a fresh yearly low i.e beneath 0.8578 between now and the first week of April and possibly lower again by late May. In doing so I do not expect the February high of 0.9073 to be revisited , if that occurs then the odds increase that by early April it will instead make a fresh yearly high i.e above the January high of 0.9330. Last trade 0.8987.” April 26th: On the chart displayed on the following page I have summarized the forecast from March for the aussie. The fall did not continue, instead the February high at .9073 was broken which set it up to make a fresh high by April which it did by the 9th, that being the alternative forecast I set out on March 2nd. The rally in the aussie dollar to continue and on a fresh yearly high by late May, in doing so I do not expect the recent support at .9157 to be retested.
Extract from the PD Global Report #55 - Philip Dooley
To receive Philip Dooley's full report or get on his email distribution list; please contact Philip directly on either 1300 73 66 11 or by email to:
Philip.Dooley@StoneBridgeGroup.com.au
The sky is falling! World stock markets crashing! Global Depression! The end is nigh so start hoarding tins of baked beans!!! - Matt Kirk 21-May-10 You’ve heard all this lately and yes, some of it may well eventuate so what are you actually going to do about it? Because you do have a choice you know. Will you follow the herd and become another disastrous statistic of the markets? Will you shove your head in the sand and ‘hope’ the markets won’t fall even further forcing you out of your Merc or Beemer and onto the bus or worse still having to walk to work sporting that ghastly fashion faux pas of business attire with sneakers for the duration of your sorry trek to the office? Is it inevitable for you to bore everyone with your share market war stories at dinner parties now held at Sizzlers instead of your favourite swanky restaurant? No, no, no ! I’m going to tell you some ways of keeping your shiny wheels, your sanity and your Jimmy Choos whilst still being able to continue your penchant for bubbles and lobster. (of course, make sure you tell your friends what I’m going to tell you so you won’t be alone at the restaurant!) Without doubt we are at a crucial time in Global Financial Markets and the good old ‘GFC’ is back with a vengeance. You can’t do diddily squat about the broader picture as it will unfold whatever way regardless of your opinions and crystal ball gazing. Let’s look at the facts as at the time of writing (21 May 2010).
The chart above is the Australian share market index over the last year. You can see it’s unceremoniously been pummelled down through the major support level at 4500. There are many reasons for this and the main one right now is the unfolding Sovereign Debt crisis gripping Europe. Oh and by the way, don’t get sucked into the ridiculous notion that Australia is somewhat insulated from our financial friends afar. In the past the old cliché was is the US markets sneezed then we catch a cold – now the problem is that it’s not just the US sneezing, it’s the whole lot of them over there on life support and we’ll be ‘NIL BY MOUTH’ in the next bed at Royal Price Alfred with them regardless of how so-called insulated we are as some may suggest. From a technical or price based standpoint our Australian share market is poised to fall even further unless a rapid turnaround in global sentiment (and a successful bailout) can be achieved in Europe by the end of May! Anyone got a spare TRILLION to help them out? (yes, that’s a 1 with this many zeroes after it 000,000,000,000 which looks like you’ve called the paramedics 4 times on your iPhone). So where could we end up and what are your options if you are holding shares at present? Well the next area of price support for us is around the big psychological round number of 4000. Markets tend to use either historical price action or ‘big round numbers’ for areas of support (on the way down) or resistance (on the way up). Intermediate levels can also be found at the mid-points between the 1000 point marks ie. At 5500, 4500, 3500 and so on. Take a look at the chart again and you can see that not only have we fallen below the 4500 support level, the All Ords has also smashed down through a huge price support level that was building over the last year or so. You can see we were stuck pretty much between 4500 and 5000 over that period with the ‘Bulls’ (buyers) not able to get prices above 5000 and the ‘Bears’ (sellers) not able to drive prices lower than 4500 over that same time frame…until now that is.
It’s vital as a trader and/or investor that you keep a level head so you can make the necessary decisions with your money without emotion or grief. Many long term investors in particular rode their portfolios down to 3100 with their hearts in their mouths and were given a reprieve by a rapid bounce back to the 5000 mark. That may not happen this time as the financial woes are more entrenched and we may well be going into a deeper and more protracted bear market similar to what happened following the 1929 share market crash. Have a look at the chart below and you’ll see what I mean! Note that the extreme sell off took 3 years to complete and a new high wasn’t made for another 23 years…hhhmmm…
Larry Williams
Tom Scollon
So what can you do right now? Step one is ensuring your stay SANE and that means being able to ‘Sleep At Night Easily’ without the worry that everything you’ve built up financially will crumble around you if this bear market takes a firm grip for many years. You would have heard that CASH IS KING in periods like this as even a small and more secure return of say 5% is better than watching your portfolio fall further. For now the SANE strategy may well be wealth preservation as opposed to wealth creation. If you haven’t done so already then now is the time to conduct a thorough analysis of the shares you are holding and put a plan in place to perhaps cash in some of your shares and sit on the sidelines for a while with at least an albeit small but more secure return. If you have a financial planner or someone managing your portfolio for you then get in touch with them and ensure they have a plan to keep you above water if the share market continues its slide. Now is not the time to be employing the strategy of ‘crossing your fingers’ or burying your end in the sand in the hope that all will be OK when you resurface for air! By then it may be too late… For a confidential chat regarding your portfolio feel free to email me at matt@toptraderthinking.com Until next month, hang onto your Fedora – this may get even uglier! Matt
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Trading Commodities - CFDs vs Futures - Jason Achjian Introduction There are two ways to gain exposure to Commodities -Futures -Commodity CFDs (You can also trade spot Gold & Silver through the FX market)
Guy Bower
The only reason, in my opinion, that you would choose to trade commodity CFDs over futures is because one futures contract is too big for the exposure you want on your trading account. Commodity CFDs allow you to trade sizes as small as 5% of the underlying futures contract QUICK FACT - What are Futures? A futures contract is a standardised contract between two parties to buy or sell a specified asset of standardised quantity and quality at a specified future date at a price agreed today (the futures price). - Price is the only variable Futures are a zero sum game, for each winner, there is an equal and opposite loser. Margin Futures margins are a set value for each contract which is specified by the Futures Exchange. For example the NYMEX Crude Oil contract has a margin requirement of US$7,088 per contract. The Exchange will review these margins when there is fluctuations in price volatility. Margin changes are quite infrequent. Futures margins are usually between 5%-10% of the contract value. Commodity CFDs are margined as a percentage of exposure. All commodity CFDs we offer are margined at 10%. For the same exposure in Crude Oil you would need to Buy 1,000 Crude Oil commodity CFDs. Based on the current price of Crude 84.38 x 1,000 x 10% = US$8,438 margin (similar to the Futures)
Catherine Davey
Understanding cents or dollars price quotation Understanding this concept will make calculating P/L and position size much easier. This applies to Commodity CFDs and Futures: Contracts are quoted in either DOLLARS or CENTS per MEASUREMENT Examples: Gold is quoted in DOLLARS per OUNCE. US$1,150.10 per ounce Crude Oil is quoted in DOLLARS per BARREL. US$84.38 per barrel Copper is quoted in CENTS per POUND. 354.5 US cents OR US$3.545 per pound Wheat is quoted in CENTS per BUSHEL. 485.25 US cents OR US$4.8525 per bushel
Sari Mustonen-Kirk
Understanding futures contract specifications vs. commodity CFDs Each futures contract has a specified underlying qty (this is set by the futures Exchange) Examples: One COMEX gold futures contract covers 100 ounces of gold One CRUDE OIL futures contract covers 1,000 barrels of oil One COPPER futures contract covers 25,000 lbs of copper One WHEAT futures contract cover 5,000 bushels of wheat >>> When trading commodity CFDs, the following applies; 1 gold CFD represents 1 ounce of gold, meaning 100 gold CFDs is equivalent to 1 futures contract; > minimum is 5 CFDs per order 1 oil CFD represents 1 Barrel of oil, meaning 1,000 oil CFDs is equivalent to 1 futures contract; > minimum is 25 CFDs per order 1 copper CFD represents 1 lb of copper, meaning 25,000 CFDs is equivalent to 1 futures contract; > minimum is 1,000 CFDs per order 1 wheat CFD represents 1 bushel of wheat, meaning 5,000 CFDs is equivalent to 1 futures contract; > minimum is 200 CFDs per order CFD minimums are from 2.5% to 5% of the futures contact size, so you can have smaller risk trades if the futures contract is to big for your account (or stop loss size)
Trading Commodities - CFDs vs Futures continued...
Calculating Profit and Loss The most simple formula in my opinion for calculating profit and loss in any market is: (Sale Price – Purchase Price) x Face Value (quantity) = P/L Remember to adjust the decimal place for commodities which are quoted in cents opposed to dollars. If the futures contract is denominated in a currency other than AUD you’ll need to convert the Profit/Loss back to AUD using the relevant exchange rate. Example: Sell 1 July Wheat futures @ 485.25 to enter, then Buy 1 July Wheat futures @ 465.75 to exit P/L = (485.25 cents – 465.75 cents) x 5,000 = US$975 Or P/L = ($4.8525– $4.6575) x 5,000 = US$975 Convert back to AUD = USD$975 / 0.8250 = A$1,182 Futures or Commodity CFDs? Everything is pretty much equal as far as pricing and charts go. There are a few small differences though… Do you trade 1,000 Crude Oil CFDs or 1 Crude Oil Futures contract? The commission for commodity CFDs is factored into the spread where as futures commission is an additional fee. Some brokers will say you can trade commodity CFDs with no commission, this is a marketing ploy and the commission is actually factored into a widened Bid/Ask spread (simular to most FX brokers). At the end of the day the brokerage is much the same, probably slightly cheaper to trade futures. Just remember when comparing the CFD commission to the futures commission there is always a natural spread in the futures market between the buyer (Bid) and the Seller (Ask) therefore the gap between the bid and ask in the CFD isn't entirely commission; it's partly the natural gap present from buying/selling demand. Futures are exchange traded so everybody who trades that contract is looking at the exact same Bid / Ask; the high / low published by the exchange is firm across all dealers; however commodity CFDs are market made and chart highs & lows may slightly differ and Bid/Ask may also differ from the underlying futures contract. In my opinion you would only choose to trade Commodity CFDs over futures if you want a smaller exposure than the full futures contract. If the size of your commodity CFD order is equal to or greater than the futures contract size I suggest trading the futures market given that it is Exchange traded and has more integrity and transparency than the market made CFDs.
Commodity CFDs and Futures are both available for trading through our award winning online trading platform eBridge Trader You can download a free demo from our website: http://ebridgetrader.com.au/freetrial
Technical Indicator of the Month - Jason Achjian
Coppock Indicator What The Coppock Curve was developed by Edwin Sedgewick Coppock, a US investment advisor, in 1962. It is a momentum oscillator that was designed for long term investors to begin accumulation at the beginning of a bull market. Coppock designed the indicator to identify significant lows in the share market by applying it to the charts of broad market indices. The Coppock Curve has proven to be very good at discriminating between bear market rallies and true bottoms in the share market. Share markets tend to make spike bottoms and rounding tops. That is a result of the fact that fear is a stronger emotion in people than greed. The Coppock Indicator signals the beginning of a bull market when it turns upwards. This signal is usually after the first leg of a bull market is underway, thus it’s highly reliable.
How The indicator is designed for use on a monthly time scale. It's the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average. Coppock = WMA [10] of (ROC [14] + ROC [11])
When A buy signal is generated when the indicator is below zero and turns upwards from a trough. No sell signals are generated (that not being its design). The indicator is trend-following, and based on averages, so by its nature it doesn't pick a market bottom, but rather shows when a rally has become established. Coppock designed the indicator (originally called the ‘Trendex Model’) for the S&P 500 index, and it's been applied to similar stock indexes like the Dow Jones Industrial Average. It's not regarded as well-suited to commodity markets, since bottoms there are more rounded than the spike lows found in stocks.
You can now place orders, get market quotes and view your eBridge Trader account from your internet enabled mobile phone - Just type the following URL into your mobile phone internet browser and use your standard login details:
mobile.ebridgetrader.com
How to add this to your Charts in eBridge Trader Whilst in your workspace viewing a chart, click this >>> Others >>> Coppock Indicator:
symbol at the top of the chart, then
The default fields that appear can be adjusted at this point for this indicator; you can also adjust them later if you wish. You can also adjust colour and the weight of the line: Click OK once you’re satisfied with the settings. You will now see the indicator added in a pane below the chart. You can later adjust settings by clicking the ‘CPI xx’ at the top left of new pane and then clicking on ‘Properties’, you can also delete the indicator from this menu. If there is any feature of eBridge Trader that you’d like covered in next months newsletter please email your request to: jason.achjian@stonebridgegroup.com.au
To open an eBridge Trader account or get further information on adding technical indicators to charts using eBridge Trader please contact Jason Achjian by Email: Jason.achjian@stonebridgegroup.com.au or Phone: 1300-73-66-11.
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William Chien: CFD Recommendation Service Trading Objectives
Trader Profile
This program focuses on trading CFDs on ASX shares with a short term view (less than 8 weeks in most cases). William Chien uses technical analysis to zoom in on potentially profitable opportunities and then forwards email recommendations to his distribution list. William is very conservative and will generally do no more than 4 trades in any given month. When conditions are not right William will not trade at all.
Traders with a relatively high risk tolerance and who also want a degree of involvement in their trading decisions would be best suited to this approach. No positions will be entered or exited without prior confirmation from each individual client. If you disagree with Williams view on any particular trade you are under no obligation to enter or exit the position.
Recommendation Perfomance
Matt Kirk
*Balance is in AUD based on minimum quantities and is net of all commissions. Results are unaudited. Updated COB 30-04-10
Conditions If you receive but do not take advantage of 3 consecutive trades you will be removed from the email list. A minimum starting balance of $20,000 is required for this service.
Jason Achjian To register your interest, open an account or request further information about this service please contact us: 1300-73-66-11 William Chien:
william.chien@stonebridgegroup.com.au
Please refer to toptraderthinking recommendation discalimer: http://www.toptraderthinking.com/toptrader/marketnews.asp?id=288&action=viewarticle
Top-Trader - Seasonal Spreads in Futures & Options In Brief Top-Trader is a recommendation program designed to take advantage of historically high probability seasonal opportunities in a wide range of markets using futures and options spreads. On average, one trade per week is generated and the length of time in each trade is approx. 23 weeks. Stop losses are based on closing prices i.e. exits are made the following day if the market closes outside of the stop level.
William Chien
Trader Profile This program suits those who want to take advantage of opportunities in stock indices, interest rates, currencies and commodities markets. Traders with a relatively high risk tolerance and who also want a degree of involvement in their trading decisions are best suited to this approach. No positions will be entered or exited without prior confirmation from each individual client.
Recommendation Perfomance
*Last updated COB 30-04-10. Balance is net of commissions Past performance is no guarantee of future results
Philip Dooley
Commissions / Conditions The brokerage rate charged is US $15.00 per side of each trade +GST. If you receive and do not take advantage of 3 consecutive trades you will no longer receive fully detailed email recommendations. Minimum starting balance of $15,000 is required.
To register your interest, open an account or request further information about this service please contact us: 1300-73-66-11 Jason Achjian:
jason.achjian@stonebridgegroup.com.au
Please refer to toptraderthinking recommendation discalimer: http://www.toptraderthinking.com/toptrader/marketnews.asp?id=288&action=viewarticle
RECOMMENDATION PROGRAMS – UPDATE COMMODITY BASKET RECOMMENDATIONS (CBR) OCTOBER 2007 TO MARCH 2010 UP 49.03% NET OF COMMISSIONS MINIMUM ENTRY LEVEL $A10,000
WILLIAM CHIENS CFD RECOMMENDATIONS JUNE 2006 TO MARCH 2010 UP 127.73% NET OF COMMISSIONS MINIMUM ENTRY LEVEL $A20,000
TOP-TRADER - SEASONAL SPREAD TRADING JUNE 2008 TO MARCH 2010 UP 35.03% NET OF COMMISSIONS MINIMUM ENTRY LEVEL $A15,000
Please contact the Futures dealing desk for further information on recommendation programs Phone: 1300 73 66 11 Email: jason.achjian@stonebridgegroup.com.au
NOTE: RESULTS ARE UNAUDITED – PLEASE CALL OR EMAIL TO REQUEST SUPPORTING DOCUMENTATION IF YOU ARE CONSIDERING PARTICIPATING IN ANY OF OUR RECOMMENDATION PROGRAMS
WANT TO RECEIVE OUR RECOMMENDATIONS? To receive recommendations on an ongoing basis you must be a client of StoneBridge Group Gold Coast Derivatives desk. To open an account email matt.kirk@stonebridgegroup.com.au or contact the dealing desk on 1300 73 66 11. Please see our Recommendations & Information disclaimer on www.toptraderthinking.com Click on 'Market News' to read thoroughly prior to entering into any of our trades. There is always a risk of loss in derivatives trading. Past performance is no indication of future results. Do not trade with funds you cannot afford to lose. Seek independent financial consultation before entering any trade recommendation program. All information and recommendations are general advice only and we have not taken your personal financial position into consideration
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