Posts Tagged ‘company earnings’

The Gap Trading Method: Part 3 of Stock Trading Tips for All Types of Market Environments

Friday, August 17th, 2012

The market has been challenging for investors in recent times, but if you arm yourself with some appropriate tools, then it is possible to make money is all types of market environments. The IRESS Trader platform with the D2MX Trading Tools plugin gives you access to wonderful array of tools.

The seasonal earnings reporting season is upon us and there have been some great opportunities to make money, using the Gap Trading method that I will discuss today.

Day trading is the establishing and exiting of a position in the one trading day. It requires a higher degree of vigilance because every tick counts in the money making process, but the beauty of this type of trading is that you have the opportunity to take advantage of compounding.

Compounding is one of the wonders of the world and Warren Buffet has used it to dramatic effect in getting the value of his investments to grow at spectacular rates. Successful day trading allows you to build on consistent profits, to enable you to build your position size and risk appetite.

The 30 Minute Breakout Trading System

The 30 Minute Breakout (30MBO) Trading System is a straightforward trading system that is directed by the price action of first 30 minutes of the trading session.

The rules of the 30MBO Trading System are straightforward:
• Scan for stocks that have gapped on open. In the current market these are often stocks that have just reported. Use the IRESS_Trader platform to scan for potential trades.
• Do not enter a trade until 30 minutes have elapsed from the start of the trading day.
• Record the High and Low of the trading range for the first 30 minutes.
• After the first 30 minutes, BUY if the stock price is trading above the high of the first 30-minute trading range.
• After the first 30 minutes, SELL if the stock price is trading below the low of the first 30-minute trading range.
• Set your initial STOP LOSS at a pre-determined level, established before you enter the trade.
• To EXIT use either a profit objective and/or trailing stop, to close your position. Depending on your risk profile you may want to take profits as the trade moves in your favour.
• Exit your trade either just before the market closes or in the end of the day auction.
• Trade only in liquid markets!

The 30MBO System

National Bank 30MBO Trade Example
NAB offered a couple of great trading opportunities after reporting on the 14th of August. On the day the report was released, the 30MBO system triggered Long Entry at $24.45 and you could have exited near the close at $24.85, up 1.6%.


Chart 1: NAB Day of Reporting

On the following day the 30MBO system triggered again a Short Entry at $24.65 and you could have exited near the close at $24.25, up 1.6%.


Chart 2: NAB the day after reporting

Computershare 30MBO Trade Example
Computershare (CPU) has also offered a couple of great trading opportunities since reporting.

Computershare (CPU) in the Days around Reporting
Chart 3: Computershare (CPU) in the Days around Reporting

On the day of reporting, August 7th, the 30MBO system triggered a Long Entry at $7.87 and you could have exited near the close at $8.00, up 1.7%. The next day the 30MBO system triggered again a Long Entry at $8.16 and you could have exited near the close at $8.31, up 1.9%.

Of course the 30MBO system will not always work, as was the case for CommBank where the trade on the day of reporting, 15 August, would have closed out at a slight loss.

Lessons Learned

• Only trade liquid stock. I would recommend sticking to ASX Top 20, but you may expand your trading universe to the ASX Top 50, depending on your leverage and risk tolerance.
• Use the Analyser tool in the IRESS Trader platform to scan for potential trades.
• Use compounding of profits to adjust your trade size once you are comfortable with the 3MBO Trading System.
• Take advantage of the MINI trading warrants. Subscribe to the D2MX Daily Trading Report for trading ideas and contact us on 1300 610 024 if you want to trade these ideas.
• It is best to trade this system when there is a catalyst for the stock, such as earnings or corporate news, which adds to the liquidity of the stock.
• Always know when you are wrong – before you enter the trade!
• Use profit objectives to take part profits as the trade progresses.
• Place your initial STOP at the bottom of the first 30 minutes trading range, or if that is too far from the entry price use 50% of the 30 minute trading range.
• Use a 20 minute chart to fine tune your trade.
• The system can be fine tuned by introducing a Stop and Reverse feature to the system.

The Trade

There are plenty of ways to make money in the market and with the way many stocks move around earnings or corporate news events, the market gives nimble traders opportunities to make money through day trading.

The 30MBO Trading System is just one of a number of trading systems that can be used for this type of trading. We have presented this system in its simplest form and if you would like to know more, refer to Jake Bernstein’s book, The Compleat Day Trader, on the subject. In future articles we will discuss other day trading methods, which can revolve around the previous close, the day’s open and/or low for 30 to 60 minutes.

Utilise the features in the IRESS Trader platform to select your trades, according to your market view. You will save time and potentially increase your returns by trading with the trend.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment.

To subscribe to the D2MX Daily Trading Report or  call 1300 610 024.

Also see:
Warrant Trading for All Types of Market Environments Series
Part 1 – Shorting With Limited Risk Using MINIs
Part 2 – Boosting Dividend Yield Using Warrants

Michael Hevern
Investment Adviser
D2MX Trading

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

For Buy and Sell recommendations on ASX listed companies register for a free trial of MDS Financial Research.
The D2MX Financial Advisory Services offers general advice on trading options to generate consistent steady income on your investment portfolio. Call 1300 610 024 for further information.

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Weekly Market Wrap: Decision Time

Friday, April 20th, 2012

It’s decision time for traders as markets test key levels around the globe. The US continues to outperform, but the ASX has also shown some strength this week. Traders cheered the news that the IMF raised its outlook for global economic growth to 3.5% for the year, though the news was tempered by the IMF also urging stronger measures to deal with the eurozone debt crisis.

In the US the earnings season has begun on a positive note. The banks are holding on to recent gains, while we are seeing some profit-taking in the tech sector and this money appears to be rotating into the downtrodden resource sector (which would be good news for Australia). Broadly the market indexes are hanging on to their 50 day moving averages, but if these levels fail to hold we could see markets retest their 200 day moving averages some 7% below where we are today, which would be a healthy correction.

Traders are having to balance the good US earnings reporting season and the troubles with eurozone debt issues in the PIIGS economies. Domestic US economic news has been mixed this week, but overnight there was positive news with the index of leading economic indicators posting a sixth straight increase in March, while the Federal Reserve said banks will have two years to bring their activities in line with the “Volcker rule” before regulators start enforcing it, which is expected to be seen positively by the banks and investors alike.

Key European markets are retracing from their 50 day moving averages and look to be on track to test their 200 day moving averages near-term. European financiers have been visiting the US this week to argue their case that the eurozone financial system needs even more funding than the recent EUR1 trillion LTRO. Financial-sector stocks have led the markets lower in the eurozone, as the costs of borrowing for Spanish, Italian and French debt have been edging higher, while resource stocks have been generally weaker. The eurozone markets are due for a bit of a bounce, having closed lower in the past four weeks, and the comments from the International Monetary Fund as it raised its forecast for global economic growth in 2012 and 2013, citing improved financial conditions and unwinding of the financial crisis, have seen bargain hunters step in late this week. The global investor mood is very much dependent on the resolution of the Spanish and Italian debt issues near-term.

In Asia key markets are holding at or above their 50 day moving averages, with the Hong Kong market outperforming. The Chinese market has bounced strongly in recent weeks, as traders anticipate that the Chinese government will lean towards monetary easing in the near term. The main news of the week revolved around Chinese economic growth GDP, which slowed to 8.1% in the first quarter from the year-earlier period (below the 8.4% expected). Also traders are taking time to digest the ramifications of the announcement by the People’s Bank of China to double the yuan’s trading range against the dollar on a given day from 0.5% to 1%, pushing currencies such as the yen and the dollar higher, and hurting commodity prices.

In Australia the market continues to drift higher. A number of major resource companies have reported quarterly production figures which have been impacted by weather conditions, but companies are generally holding to their full year production forecasts, which should be a positive for the overall market and could be just the ticket for our market to push through the key resistance levels that have kept our markets in check since the melt-down back in August last year.

Commodity prices have been trading sideways this week, as the US dollar has eased. Crude-oil prices are hovering around the $US102 support level and copper has again been unable to trade above $US4.00 and is holding below its 200 moving average support around $US3.60, while gold prices have again found support around $US1,640.

The Aussie market has again bounced off its 200 day moving average, and is testing its 9-month resistance level, around 4380 level again. On the S&P/ASX 200 the 4250 level remains the crucial support level and 4400 is the key level on the upside. Stocks have effectively been drifting higher as we move into the bank reporting and dividend season, but we need the materials sector to participate for the market to reach new highs.

A number of the S&P ASX sectors are performing strongly above their 150 day moving averages, having broken through key levels in early March. These include the defensive sectors of Healthcare and Property Trusts, while Telecoms and Utilities have eased. The Financials, Consumer Discretionary, Consumer Staples, Industrials and Energy sectors continue to bounce higher off their 150 day moving averages, while the Materials sector looks to be finding support at current levels, but it continues to underperform.

Traders should be looking to protect their profits in this market and reduce their risk by using options and warrants strategies. The D2MX Financial Advisory Services team can help with these trades. Call me on 1300 610 024 for further information. Investors should also be looking to utilise options and warrant strategies to protect their positions and profits. Options are a relatively cheap form of insurance, as volatility remains low, and you can also leverage yourself for breakout trades as they occur.

Remain attuned to the news from overseas, particularly from the eurozone and China in relation to easing policies, and the US as their markets back off their multi-year highs. Monitor the performance of China and the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 index is currently trading at 4359 and is holding above the key 200 day moving average. Key levels for the index next week will be 4250 and 4420, with 4300 the key short term pivot level.

By Michael Hevern
DMX Retail Trading Desk

For Buy and Sell recommendations on ASX listed companies register for a free trial of MDS Financial Research.

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.

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Weekly Market Wrap: Traders Cheer the Greek Debt-Swap Deal

Friday, March 9th, 2012

Investors had plenty of news to digest this week, but the major market mover has been the Greek debt-swap deal, which was at risk of being derailed by the private-sector bond holders.

Traders pushed markets down for their biggest single day losses since last November, with the Dow Jones recording its first triple digit loss for the year. The selling was sparked by renewed concerns that the private-sector was reluctant to participate in the Greek debt-swap, which was crucial for Greece to gain access to its second bailout funding.

US markets have backed off key levels this week, with a sharp dip coming after Greece had debt-swap issues, but the markets have since recovered to record their best two-day rally for the year. Commodity prices were sold-down sharply earlier in the week as traders took their profits off the table, but they appear to be finding support again in recent days. There will be some telling data released tonight, with the Non-Farm Payroll monthly employment report, which is expected to report an unemployment rate that will hold steady at 8.3% in February, and that the economy added 213,000 jobs. On the corporate front Apple has released a new product suite and has reached $US500 billion in market capitalisation.

European traders have driven global sentiment this week, with troubles over the participation rate of private-sector creditors in the Greek debt swap. However news overnight has confirmed that the participation rate will be high enough for Greece to get the second bailout package, worth EUR130 billion, and avoid a “disorderly” default. At last report private-sector creditors representing 75% of outstanding Greek debt have agreed to exchange their holdings for new debt.

Italian government bond yields fell to 4.8% overnight, their lowest level since mid-2011, while the euro dollar climbed sharply against the US dollar. The other issue for the week was the slowing eurozone growth rate, as the ECB and the Bank of England held interest rates steady, but the ECB has said that eurozone economic growth will shrink by 0.1% this year (down from 0.3% growth), and the ECB now expects 2013 growth of 1.1% (down from 1.3%). In Germany however, the market has been supported by news that industrial production for January exceeded expectations, as production rose 1.6% on the previous month.

Asian markets remain at multi-month highs, with Japanese stocks benefiting from a weaker yen and the Chinese Shanghai Composite Index holding above 2400, its key 6-month pivot level, after traders cheered the news that the Chinese central bank is considering further easing. The Hong Kong and South Korean markets are at levels not seen since July last year, as traders shrugged off comments from Chinese Premier Wen Jiabao, at the annual National People’s Congress, that the Chinese economic growth target was cut to 7.5% for 2012, after keeping it at 8% for the past eight years, while the annual inflation target was set at 4%.

Commodity prices initially sold-down on the news about slowing growth in the eurozone, China and Brazil, but they have since recovered as we finish off the week, with the gold and silver markets and the crude oil prices all bouncing off six-week support levels.

The Australian earnings season continued this week, and the dividend season is drawing to a close. We have been driven by global forces this week, with the materials sector suffering from lower commodity prices.

The Aussie market has broken down through its 50 day moving average, and the index is attempting to find support at its six-month pivot level around 4180. On the S&P/ASX 200 the 4180 level is the crucial support level and the 4320 level becomes increasingly more important each time it is tested. This week we found support around the 4150 level but we are now trading higher again. A number of the S&P/ASX sectors are bouncing off their 150 day moving averages, having found support after their sell-off earlier in the week. These include Energy, Consumer Discretionary, and Industrials. There continues to be rotation out of the more defensive sectors like Utilities and Telecoms, while Materials and Financials have broken down from their 50 day support levels.

Traders are eager to lock in profits in this market, so reduce your risk by using options strategies. The MDS Financial Advisory Services team can help with these trades. Call 1300 610 024 for further information. Investors should also be looking to utilise options strategies to protect their positions, as options are a relatively cheap form of insurance, even though volatility has picked up of late.

Keep an eye on the Aussie reporting season as it winds down and remain attuned to the news from overseas, particularly from the eurozone and China in relation to easing policies, and the US as their markets hover around multi-year highs. Monitor the performance of the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 index is currently trading at 4198 and is holding above the key medium-term pivot level around 4180. Key levels for the index next week will be 4140 and 4280, with 4200 being the key pivot level.

By Michael Hevern
MDS Trading Desk

For Buy and Sell recommendations on ASX listed companies register for a free trial of MDS Financial Research.

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of MDS Financial Services Pty Limited ABN 28 088 190 283 AFSL No. 333298 (MDS), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by MDS Financial Services Pty Ltd, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.

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Stock Market Analysis: Weekly Market Wrap

Friday, January 14th, 2011

European Debt Contagion Fears Ease

The Aussie market surged yesterday after a steady start to 2011, with Japan joining the ECB and China committing to the purchase of European debt. European stock markets are now trading at 28-month highs, rising after the successful bond auctions in Portugal, Spain and Italy, following Japan’s commitment. The success of the first bond auctions for 2011 has supported the view that there is no need for an emergency bailout, at least in the near term.

In the US, economic data continues to support the view that the jobless economic recovery is still intact. In Asia, the World Bank has said that China should be targeting 2011 growth of 8.7 percent, down from 10 percent in 2010. This means that China, the world’s second largest economy, will have considerable scope to raise its interest rates in 2011, however investor concerns will likely resurface if this happens and it will be reflected in pressures on commodities.

Commodities are the key driver of our market and have been holding up this week, primarily because the US dollar has been pulling back, particularly against the Euro. Gold is starting to lose its shine as a safe haven investment, with investors looking set to move into equities to gain more risk exposure in their portfolios – a result of increasing confidence in the continuation of the global economic recovery into 2011.

A global theme is the concern regarding rising inflation in 2011, particularly in soft commodities prices which look set to remain at elevated levels due to worry about food supply.

Locally the Australian economy looks set for a tough start to the year, with Australia experiencing severe flooding and central Queensland experiencing one of the worst floods on record. This will impact the Aussie economy near-term and we have estimates of a cut in this year’s GDP of up to 1 percent. These floods will be especially detrimental to our terms of trade medium-term, with production ceasing in many areas.

As the year progresses company earnings will recover as the monumental task of rebuilding communities and infrastructure gets underway. This will provide investment opportunities for those who can see through the near-term fall in corporate earnings.

The investment themes for this year will be:

* the economic recovery from floods and droughts;
* commodities supply constraints and pricing;
* improving corporate dividends;
* interest rates and Aussie dollar strength;
* continuing M&A activity.

You can read more on this in the Analyst’s Eye where we have done an in-depth analysis of the market performance last quarter, with a view to uncovering what it means for 2011.

By Michael Hevern
Head of Research

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