Hi everyone,

I hope you all had a great Christmas and were not too put out by the snow or burst pipes! Just a short post today to wish you all a very Happy New Year and the best of luck with your trading in 2011 and to provide a few thoughts on the year just past and what to look out for in January.

2010 - A Choppy Year

As the year draws to a close looking back over 2010 it’s been a pretty good year for the markets for the most part. This time last year I wrote a post commenting on how the DOW was struggling to break through resistance at 10,500, well it eventually did in late March, rising all the way to 11,250 before selling off sharply again during the Summer months to around the 9,600 mark. We then had some volatile trading up to the end of August as the Bulls and the Bears fought out the war between those who believed “we were on the road to recovery” and those who said we were heading for a “double dip recession“. In the end the bulls won out and from September to year end we have seen the DOW rise over 12% from 10,300 to close our the year around 11,500. So we have finished up the year with a nice 10% rise for the year on the DOW. Fans of the Nasdaq will be even happier with the tech index rising a very impressive 19% since the start of 2010.

Will “The January Effect” Return in 2011?

Finally before I wrap up this post as we get ready for a new year which will no doubt bring plenty of great trading opportunities keep an eye out for the so called “January Effect” during the next few weeks. The “January Effect” is based on the theory that stocks generally rise in during the first month of the year. Although we didn’t see any such move last year (when the DOW actually sold off about 3.7%) historically January has seen the DOW record an average increase of approx 1.6% between 1950 and 2010. Most market analysts believe these increases are driven by a combination of pension funds putting new cash investments received to work and individual investors who sold shares coming up to year end for tax reasons putting their money back to work in the first few weeks of the new year. Whether the market can continue to push higher this January after rising 12% over the last 4 months of 2010 will be interesting to watch but a push towards the psychological 12,000 mark seems to be in it’s sights.

Until next time enjoy the New Year celebrations,
Happy Trading,
SpreadTrader.ie : -)

Hi everyone,       

It’s a massive week for the Equity and Currency markets with the US Mid-term Elections taking place yesterday, the Fed Meeting wrapping up its 2-day meeting today and a US Non-Farm payroll figure due out later in the week. After a massive 13.5% run-up in the S&P 500 and a 12% run-up in the DOW since September 1st the markets have paused somewhat for the last couple of weeks in anticipation of what the outcome of this week would be. The big question now is as the various pieces of news start to unveil themselves how will the markets react from here. Will QE2 be enough for the DOW to break decisively though 11,200 and continue higher or will we see a “Buy the Rumour, Sell the News” reaction? In this post I take a quick look at what’s involved.

Obama Loses Control Of The House Of Representatives, Clings onto Senate

First up the mid-term elections in the US. At this point we already know the US public have given President Obama the kicking many expected was coming his way, although with the Democrats managing to cling to a majority (albeit a very slim one) in the Senate perhaps it wasn’t as bad an outcome for Obama as it might have been. He has however lost control of the House of Representatives which is likely to make the final 2 years of his Presidency very difficult as he faces a hostile Congress who are likely to make the pushing through of the Obama agenda a much more difficult prospect.

Looking at the Election results themselves, of the 435 seats up for grabs in the House of Representatives the Democrats went from having a 257 to 178 comfortable majority to how facing a 182 to 238 minority with about 15 seats still up for grabs at the time of writing, a significant drubbing for the “Yes We Can” Man. In the Senate things fared a little better, prior to the elections the Democrats held 59 of the 100 seats, post Election they sit on 51 seats with the Republicans with 46 seats and 3 seats still to be decided as I write this piece.

So what will the Republicans seizing control of the House of Representatives mean for the markets, which is all we really care about here at SpreadTrader.ie! Well many feel it should be a positive thing with the Republicans seen as being more pro-business. This is likely to lead to less aggressive taxing and more business-friendly policies. They are likely to challenge Obama’s focus on Health Care Reform which many feel is one of the main reasons for this mid-term backlash from the US public who would rather see him focus on creating jobs as the US unemployment figure continues to hover near 10%. From a sector perspective most analysts expect Energy and Defensive stocks to do well with the Republicans having a larger say on legislation going forward. Overall though I think these election results were very much anticipated by the markets and what’s likely to have a more significant influence is what the Fed announces in relation to further Quantitative Easing (QE2) measures after its 2-day meeting wraps up today.

QE2 Will Be The Real Market Driver

We can see from the Daily DOW chart below that for the last 2 weeks the markets have been consolidating close to the 2010 highs of 11,200 after it’s massive 6 week run up from 10,000 at the start of September. It may seem obvious but from here we are going to breakout one way or the other. And the direction of that breakout will really come down to the measures the Fed announces after its meeting. The market is expecting them to announcement the buy up of more US Treasury Bonds, the only question is the extend of the buying. Anything less than $500 billion in new purchases could disappoint the markets resulting in a significant sell-off. Should they come out with a headline figure like $1 trillion however, well that could be exactly what this market needs to breakout above 11,200 and push on towards 12,000 mark.

DOW Jones - Which Way Will It Breakout (Click twice to Enlarge)

Rather than second guess the outcome of all this I’ve been lightening up on my long positions over the last few days and effectively taking a seat on the sidelines to wait and see what happens. Personally I’m thinking after such a run-up to where we are that we could well see a “Sell the News” reaction. That said with so many traders positioned to the short side any surprise in the extent of the QE2 measures announced by the Fed later today could be enough to see a breakout to the upside as a result of a bout of short-covering…All will be revealed in the next couple of days I guess!

Until next time,
Happy Trading,
SpreadTrader.ie : -)

Hi everyone,

Just a short post today to mention a Trading Competition MarketSpreads are running which might be of interest to some of you. There is a prize fund of €20,000 so that’s not to be sneezed at, especially in these recessionary times and a nasty budget in December on the way! And for those new to trading a competition like this it is probably a good way to get some trading practice in without risking your own money and possibly coming out with a nice Christmas present if your trades work out well! The competition runs until December 17th so you’ve plenty of time to enter and get on the leaderboard.

I’ve had a quick look at the competition details on their website and it seems straightforward enough, once you sign-up to take part MarketSpreads set you up with a separate demo account with €5,000 in it which you basically have to grow as high as you can by the time the competition ends on December 17th. Whoever grows their account the highest wins the top prize of €10,000. There is a separate prize of €6,500 for the new client who grows their account the highest. And there’s another €3,500 prize which will be awarded by MarketSpreads for exceptional or interesting trades that make good use of their platform – not too sure what you have to do to be in with a shout of winning this prize but I am sure someone will do something a bit out of the ordinary which will grab the attention of the MarketSpreads guys.

It’s worth noting that there is an upfront cost required to enter, if you are a new MarketSpreads client you need to open a live account and fund it with €250, however this will be refunded to you once the competition ends, so essentially it’s free for new clients to enter. Not quite so free for existing MarketSpreads clients however, they will have €250 deducted from their live account to enter but this will only be refunded if the balance in their competition demo account is higher than the 5K starting balance at the end of the competition (not too bad I guess given that most traders would expect to grow a €5K demo account to some degree over a couple of months, certainly in my experience of using demo accounts over the years trading always seem a lot easier when my own money is not at stake when I hit the Buy or Sell button!!).

To be in with a shout of winning you will probably need to be fairly aggressive in your trading strategy, to put some context on it last years winner grew his 5K starting balance to 37K in the 3 months the competition ran for. By my calculations this years competition will run for about 50 trading days, so you’ll need to get off to a quick start and consider using your (hopefully!) increasing balance to leverage up your trades as the weeks go by.

As for what to trade, well there is plenty of choice on the MarketSpreads platform, everything from equities, commodities, currencies and indices. Some thoughts to consider in deciding on your trades:

• Will the run-up in Gold prices continue for the next couple of months, with many analysts calling for Gold to $1500 by year end that might be a tasty trade to consider…or will the “bubble” burst and the money be made by those going short??
• What about the other hard commodities – will Silver, Platinum and Palladium continue to rise??
• On the currency front, will the quantitative easing by the Fed see the Dollar continue to weaken against pretty much every other currency? Will the Bank of Japan start selling more Yen on the markets like they did a couple of weeks ago in an effort to stop the continued rise in their currency?? What about the on-going sovereign debt worries of the Eurozone countries, how will that impact the Euro??
• If you are going to mainly trade currencies in this competition make sure and keep an eye out for when the various central banks are going to announce their latest interest rate decisions because they can often lead to wild swings in the currency pairs offering a great opportunity to grab some profits.
• As for equities, make sure you are aware of when results are due out, for example Q3 results from the US companies will start to kick-off properly in the next few days with Alcoa announcing. For the brave trader these results could offer some excellent (if rather risky!) trading opportunities to bag some profits if you are willing to long or short ahead of the earnings release…

If you have any other interesting trading ideas that you’d like to share use the comments box below (or maybe you just want to keep them to yourself until after the competition is over!). If you are interested in entering click here to go to the competition entry page, and remember the fun kicks off on Monday!

To all those who are taking part, best of luck!
Happy Trading :-),
SpreadTrader.ie

Hi everyone,

So as we come towards the end of Q1 earnings season I thought as a follow-on from my last post I’d take a look at how the results are coming in overall and take a look at a few stocks in particular that caught my eye.

First a quick look at the results themselves, well they have been pretty amazing. As of last Friday 83% of the S&P 500 firms had beaten analyst estimates, an impressive performance when compared against the historical average of 61% of firms beating estimates. And when we say “beat” we don’t just mean topping analysts estimates by a few cent per share, nope, on average companies are beating by a whopping 21%. Another point worth noting is that when compared to last year when many firms beat estimates (albeit very low ones given the turmoil caused by the financial crisis) it was mainly achieved through aggressive cost cutting. This year things seem to be taking a different shape however with many firms beating on revenues as well as EPS, a sign that things do seem to be looking up for the US and global economies after the pain of 2008 and 2009. According to Thomas Reuters 69% of S&P 500 companies have beaten on revenue estimates.

The results from the tech sector have been particularly strong with Amazon, Apple, Intel, IBM, HP, Microsoft and Google all beating estimates. Out of this bunch I thought I’d take a closer look at Apple, Intel and Google to see what drove their impressive earnings and how their shares reacted to the news.

No Surprise in Apple’s Upside Surprise!

Probably the standout results of earnings season so far came from Apple which produced a blowout quarter that topped even the most optimistic bulls who follow the stock. Apple reported reported EPS of $3.33 on revenues of $13.5 billion against the Street’s estimates of EPS of $2.45 on revenues of $12 billion – a 36% beat on EPS and a 12% beat on revenues. For a company that is so closely followed and analysed to beat estimates by so much is amazing, you sort of wonder why all these so called experts earn the big bucks they do when they can get it so wrong…

During the quarter Apple sold 11 million iPods, 8.75 million iPhones and close to 3 million Macs. The real upside surprise here came from iPhone sales where the highest estimates from the analysts were for 7.5 million units to be shipped. It appears the pros completely underestimated the volume of iPhones Apple is now selling outside the US– particularly in Asia where growth has being phenomenal. But you don’t have to go to the Far East to see the impact the iPhone is having on society, just take a look around the luas the next time your on it or scan your office to see how many people now have iPhones – the growth is scary. Expand that from little old recession hit Ireland to the rest of Europe and the World and you can quickly get a sense for where Apple is making it’s money.

Oh and the results didn’t even include the sale of a single iPad, of which Apple have confirmed to-date that they have sold over 500K, but that was in just the first two weeks of it’s launch. The reality is they have sold many more than this, with demand for the new device running so high that Apple have had to push back the international releaseof the iPad. Assuming there are no supply issues I see sales for 2010 running over 5 million units which should feed nicely into future earnings.

As for the stock, many wondered in advance if Apple could live up to the massive expectation which had seen its share price more than double in the last 12 monthsand over 15% since the start of the year. Well they need not have worried, the blow-out results backed up with raised guidance for next quarter saw the stock gap up 6% the next day to $258, and after a brief pullback to $256 the shares pushed higher from there, reaching $272.40 last Friday. Worries over Greece and Goldman saw a significant sell-off earlier this week but the key point to note was that during Wednesday’s big sell-off the stock held above $256, holding the gap-up which came after the results. In fact Wednesday’s low brought a lot of buyers in with Apple closing back up near it’s highs of the day. From a technical perspective this created a “bullish hammer candlestick” (see chart below) which is a bullish indicator, basically defining the maximum power of the bears. That bullish indicator bore true yesterday with the stock up $7, or over 2.5%, to close back near $269 a share. Another point worth noting in relation to Monday to Wednesday’s pullback is that it was on below average volume, compared to last week’s breakout which was on volumes well above the 3 month average.

Apple Gaps Up On Excellent Results (Click twice to Enlarge)

From here I think $256 defines our downside risk, but that’s still a long way from the current price so it’s not an ideal trade to jump straight into here. Ultimately I think Apple goes higher – we just need to bide our time for the stock to settle a bit more into it’s new trading range and look to get long on any low volume pullbacks. In my last Apple post2 months ago when I discussed the potential impact of the iPad I predicted Apple, then at $200, would hit $250 before the year was out. Little did I know at the time it would take it a mere 2 months to reach (and smash through) that target level! I’ll go again and this predict we’ll see $300 before the year is out…which should mean it will be there sometime in June given my track record!

Right in an effort to deliver on my promise of shorter, more regular posts I’ll call it a day here now and will follow-up with a look at Intel and Google’s results over the weekend.

Enjoy the bank holiday,
Happy Trading,
SpreadTrader.ie : -)

Hi everyone,

On Friday the DOW closed just shy of the psychological 11,000 mark at 10,997. In fact as you will see from the DOW JONES Cash Rolling chart below it actually pushed just above the 11K mark in after hours trading. The DOW, along with the S&P 500 and the Nasdaq have all been on quite a run over the last couple of months as the markets shrug off worries about Greek debt to continue to push higher week after week. With the DOW closing up 0.5% this week it has now closed up 9 of the last 10 weeks! The big question now is, with the Q1 earnings season kicking off later today with DOW component Alcoa reporting after the bell, whether or not results can surprise enough to the upside to keep this rally going.

DOW Weekly Chart - Up 9 of last 10 Weeks (Click to Enlarge)

How Will Markets React To Earnings?

With a 12% run-up in the DOW since it’s 2010 lows on February 5th and a 70% run-up since it’s 2009 lows on March 5th it is going to take some seriously good results for the DOW and other indices to push on past the 11,000 level and make the move towards the next big resistance around the 11,800 level.

Analysts seem to be split on how the markets will react over the next 3 weeks as results come in each day. Some are arguing with the day sitting at the 11,000 level and after such a massive run-up and with equities clearly overbought right now a 5-10% pull-back is on the cards and regardless of how good, bad or indifferent the results are the market will take this opportunity to sell off. Excellent results could see a “sell the news” reaction providing traders an opportunity to take some profits after a great 12 month run. It is worth noting that during the last earnings season stocks actually lost 3% as investors sold  equities despite very strong results that easily beat what the Street was looking for with 72% of companies beating analyst estimates for the 4th quarter.
Similarly if results disappoint and fail to meet analyst consensus this will point to a US economy that is not out of the woods just yet on the recession front and is likely to leads to a fairly nasty sell-off with talk of “a double dip recession” surfacing once again.

DOW Touches 11,000 (Click to Enlarge)

The bulls on the other hand are holding out for another set of excellent results which will help reaffirm the argument that for the US the worst of the recession is behind them. Strong results, especially from the retail sector, when combined with the positive employment and housing data that has been coming through over the last few months could well act as the catalyst for the money that is still sitting on the sidelines to be put to work. According to Thomson Reuters the expectation is for S&P 500 companies’ first quarter earnings to rise 36.8 percent from the same quarter a year ago. Today’s news that EU finance ministers have reached agreement on a €30 billion loan facility for Greece should be another catalyst for the markets this week, removing one of the big uncertainties hanging over the markets for the last couple of weeks. As an aside on this €30 billion bailout, sorry I mean loan, for Greece I read earlier that Ireland has agreed to lead €450m of it to Greece if required at an interest rate of 5% which is actually slightly higher than the rate we can currently borrow at, so we might actually make money on this one if the Greeks come knocking!

But back to earnings season and how the markets might react. Personally I’m not sure what way it will pan out, the trend is definitely higher so I don’t think I’d be rushing in to short the market. At the same time the markets are certainly over-extended and a would not be surprised to see a short-term pull-back of 5% or so. If there is to be a pull-back a couple of levels that might act as support would be firstly the 20 day moving average at around 10,850. Since the market’s big 1.5% jump on February 16th the 20 DMA has acted as support when called upon, albeit only twice since then given the strength of the market. If the 20 DMA does breakdown then look to the January highs at around 10,730 and after that look to the 50 day moving average to come into play at around 10,550 as possible areas of support.

Holding Positions Over Earnings

Many traders argue that it’s not wise to hold open positions over earnings as it’s a time when stocks are prone to gap up or down depending on how the market reacts to the results just released. This is good advice and I’d definitely recommend not opening new positions in a stock which is due to release results in the coming days. Likewise if you already have positions open in which you are nursing losses but holding out hope that the upcoming Q1 results might rescue your trade this too is a very risky approach to take. I’d suggest closing out your position in advance of the upcoming results otherwise you could end up with a small loss becoming a much larger one. If on the other hand you already have long positions open which are in profit then these are the types of trade I would consider moving up my stop up on rather than close outright in advance of the results. With these positions there is still the risk of results disappointing the market a the stock gapping down below your stop but you are also giving yourself the chance to take part in any earnings surprise to the upside. It’s this last approach I’ll be taking with long positions I currently have open in Apple, Verizon, Yum and Ford which I have had open for several weeks / months at this stage and all are doing quite nicely. Over the coming days I’ll tighten up my stops so that if results do disappoint I should at least close out with some profits. Hopefully a few will surprise the market with strong results and provide some nice gap ups!

Where To Get Earnings Dates?

Before I finish up this post I wanted to touch on a question I received from a regular reader of the blog a few weeks back. Declan asked if I could cover something on where to find out what results are coming out per industry. I’m not too sure on the “per industry” part as from what I can see from my research on this the companies reporting each day over the 3 week earnings season seem to mixed across all industries. For example up next week we have Alcoa (Materials), Intel and Google (Tech), JP Morgan and Bank of America (Financial), YUM (Consumer) and GE (Conglomerate) all reporting.
So what’s probably more important for traders is for them to be easily able to find out when a stock they currently have an open position in (or one they are thinking of opening a new position in) is due to report. For this type of info I have found a site called Earnings Whispers to be one of the best out there. It’s simple to use, just bang in your ticker into the “Get Whisper” box on the homepage and click “Get”. They return a lot of very useful information such as the results release date, consensus estimate and the earnings whisper for EPS. Another useful tool on the site is the Earnings Calendar, which will show you day by day which companies are due to release earnings results. So over the next 3 weeks or so it could well be worth your while taking 2 mins each morning to click on the earnings calender for that day to see whose due to release. If anyone has any other good websites they use for earnings release dates please use the Comments box below to let us know.

Right that brings this post to an end.
Until next time,
Happy Trading,
SpreadTrader.ie : -)

Hi everyone,

Since it’s launch amid much fanfare by Steve Jobs and co a couple of weeks ago the Apple iPad has received plenty of media coverage. Hailed as the latest game-changer from the company who brought us the iPod and then the iPhone prior to the launch, the coverage post-launch has ranged from positive to negative and others somewhat undecided. In this post I thought I’d take a look at both sides aswell as sharing a few videos I came across which I thought you’d enjoy.

A look at the iPad’s Failures

Described in classic Jobs fashion as a “truely magical” and “revolutionary” device the initial reaction to the iPad was far from positive with many analysts quick to point out it’s failures. So much was written about what the iPad was going to look like and be able to do prior to the launch I guess it’s no surprise that it failed to live up to the ridicuously high expectations. Some of the main failures which one would be expecting Apple to address in future generations of the iPad are:

• It’s lack of Flash compatability. Like the iPhone and iPod Touch when it came to the iPad Apple continues to shun Adobe by refusing to support Flash on it devices. While it won’t stop consumers purchasing the iPad it’s certainly a frustration they won’t be happy with.
• No built in camera. While you wouldn’t really plan on taking pictures with your iPad given it’s size, the lack of a camera is a drawback when it comes to wanting to have video calls using Skype or similar software.
• No USB. For me this seems one of the biggest failures in the new device. How any tablet device could be produced without at least one USB port is beyond me. What it means is you will not be able to upload your own files or software to the device but instead all data and software that makes it onto your iPad will have to come through Apple approved channels such as your iTunes account.
• Decision to stick with AT&T. While it won’t affect us over this side of the Atlantic it does appear by all accounts that Apple’s continued willingness to go with AT&T as it’s network provider continues to frustrate users throughout the States who would much rather see Apple move to Verizon’s network.
• No multi-tasking. Another biggie for me is the news that the iPad does not allow for multi-tasking across apps and programs. If the iPad is to be a real alternative to a notebook then Apple needs to address this limitation sooner rather than later.
• The name is a weird choice! While the previous drawbacks can all be addressed in later versions of the iPad it is highly unlikely at this stage that Apple will backtrack on their choice of name for their latest web-browsing, music playing, book reading, game playing device. Many analysts believe Apple might have been better advised to go with the iSlate, iTablet or one of the other names suggested pre-launch rather than going with a name that instantly would lead to puns and jokes…

The above failings of the iPad have been covered on countless articles and blog posts since it’s launch on January 27th but for me the following video is the best sum-up of the iPad’s failings that I’ve come across!

Hitler Reacts To Apple’s iPad

It’s Not All Negative

Now to be fair to Apple not everything about the iPad has been a disappointment and it certainly seems that as the weeks have passed more and more analysts and commentators are starting to see the true potential of Apple’s latest device. So lets take a look at the features that are likely to lead to the iPad’s success:

• Sleek Design. Once again Apple has come up trumps in the design department with the iPad. It is super thin and light at just half an inch wide and weighing only 1.5 pounds.
• Built in 3G and Wifi. No surprises with the inclusion of this feature but in my opinion it will be key to the iPad’s success. The idea of a super thin, slick device that I can just pick up from my coffee table, hit an on-button and within seconds be surfing the web is a level of convenience that people all over the world want and expect in the “always online” lifestyle the sums up modern day living. Combine this fast online connection with the brilliant touchscreen surfing experience that we have come to expect from Apple products like the iPod Touch and iPhone and you can see where the iPad’s market lies.
• The App Store. A great move in the development of the iPad was to ensure that almost all existing apps developed for the iPhone / iPod Touch will run on the iPad without any changes by the developers. That means from day 1 purchasers of the iPad have access to over 140,000 apps which they can start downloading. That’s not a bad start and you can be sure that app developers are already working on their next generation of apps designed specifically for the larger display of the iPad. In particular I can see games developers rubbing their hands at the options available to them.
• The iBook Store. Again no suprises with the launch of an online bookstore in conjunction with the iPad as for weeks in advance rumours were rift of potential deals being signed with some of the biggest book publishing companies in the world to have their books available in Apple’s new online book store. Pitting Apple directly against Amazon and it’s very successful Kindle that launch of iBooks has the potential to be another big revenue generator for Apple. Personally I think the Bookshelf approach (see image to the right) is very cool, as soon as you buy a new book it appears on your bookshelf alongside your other books and you just tap to start reading. Flicking through the pages is very slick also and when combined with the iPad’s LED backlit screen, the whole experience oozes the quality we have come to expect from Apple.
• Battery Life. According to Apple when fully charged the iPad has up to 10 hrs of battery life. Manufacturers are known for over talking the battery life of their devices so it will be interesting to see how the iPad battery measures up in reality but if it does last up to 10 hrs it will be an impressive achievement for such a thin device which has no interchangeable battery facility. According to Jobs the 10 hr battery life will allow users to watch video non-stop on a transatlantic flight.
• The Affordable Price. Prior to the launch many analyst had highlighted the price-point of the iPad as being key to it’s success or failure. Most were expecting a price of anywhere between $750 to $1000 so when the iPad was eventually launched with a base price of $499 for the 16 gig model it certainly surprised quite a few people. Of course most purchasers will be looking at the more expensive models of the iPad which go up to $829 for the 64 gig wifi / 3G enabled version. Still with even the most expensive models coming in at prices lower than most analysts were expecting it is sure to help iPad sales get off to a good start. The option of signing up to an unlimited 3G data plan for just $30 a month looks like excellent value also.

And after letting Hitler have his say on the iPad’s failings above I thought it would only be fair to let the folks at Apple have their say on what’s “amazing” about the iPad and why we should all run out and buy one.

The Official iPad Video From Apple
 

A Look at how the Stock Price Has Reacted

Of course the main thing we are interested in here at SpreadTrader.ie is how has the stock reactedto the launch of the iPad. Well if we take a look at the chart below it is clear that following the initial launch on January 27th we had a classic case of “sell the news” with the stock suffering big drops in the days immediately after the launch, falling 10% back to $190 a share. This shouldn’t really be a surprise given the massive hype that preceeded the launch and the fact that the stock has more than doubled in the last 12 months. Interestingly though it did manage to hold just above the $190 level and as a result avoided hitting a lower low on the daily chart.

A look at Apple’s Chart (Click to Enlarge)

Since then Apple has recovered nicely, firstly building a nice base between $190 and $200 before finally breaking back above $200 last Tuesday. This move back above $200 was combined with a MACD cross-over which is another bullish indicator. Short-term $200 should act as support from here but a drop back to the low $190’s is still a risk in these volatile markets so tight stops should be used for any long trades. Longer term I’m still bullish Apple which will be no surprise to regular readers of the blog. I used the weakness after the iPad’s launch to go long again at around $193 and am optimistic that Apple will move to new highs over the coming months. There is some significant resistance at $215 but once that is cleared I see Apple moving up significantly, especially in the run-up to Q2 results due out the end of April. In my last Apple post a few months back I felt Apple was going to $200 before the end of 2009. At the risk of being completely wrong this time round I am going to call Apple hitting at least $250 before 2010 is out.

Finally before I wrap up this post I have one more iPad related video to share which I came across a few weeks back. We all know what a legend Steve Jobs is when it comes to presenting Apple’s latest technology to the world. It’s all about the adjectives and superlatives. Keep telling the audience how “amazing, great, phenomenal, awesome” the device is over and over again and they might actually believe it and go out and buy it! Neil Curtis, a video editor and body painter, decided to take the iPad launch event and strip out everything except the “magical” words we come to expect from Jobs and his colleagues. The result is a 180 second video that I’m sure will bring a smile to your face! You can check out some of Neil’s other work here.

The “Awesome” iPad

Right that wraps up my look at Apple’s iPad. I’m looking forward to checking one out when the hit the shops over here.

Until next time,
Happy Trading,
SpreadTrader.ie : -)

Hi Everyone,

Work travel has set me back a bit in getting the final part of the Review of 2009 up on the blog but at last here it is. As a friend of mine said to me the other day, if I don’t get the final part up soon it will be time for the 2010 review! For those who want to catch-up on Parts 1 and 2 of the 2009 Review of the Trading Year they are here and here.

September – eBay Sells Majority Stake in Skype, Inaugural Global Irish Economic Forum

September got off to an exciting start with the announcement that eBay had agreed to sell a 65% stake in internet calling firm Skype to a group of investors in a deal that valued Skype at $2.75 billion. The purchasers were a group of investors led by private equity firm Silver Lake Partners and would pay almost $2 billion in cash over to eBay for the majority stake. While eBay will no doubt be happy to get their hands on the $2 billion it is still significantly less than the $3.1 billion eBay paid to buy Skype from it’s founders in 2005. At first glance the deal appears to be good value for the investment group as Skype is estimated to have revenues in the region of $600m a year and continues to gain in popularity with people wanting to chat to their family and friends around the world cheaply. There are also rumours that Skype might be floated in an IPO later this year.

Later in September Farmleigh House hosted the Inaugural Global Irish Economic Forum, a 3 day event which brought together some of the most influential members of the global Irish community to discuss how they could work together to help Ireland’s economic recovery. The 160 attendees at the conference included such influential business leaders as Craig Barrett (former CEO and Chairman of Intel), Peter Sutherland (Chairman of BP and Goldman Sachs International), James Hogan (CEO of Etihad Airways) and Alan Joyce (CEO of Quantas Airlines). It is well known that Irish business leaders have risen to the top positions in some of the largest corporations in the world across all sorts of industries. So the organisation of a forum such as this to tap into that knowledge can only be a good thing for the country, especially given the rate at which unemployment continues to rise here at home. Here’s hoping the government acts on some of the suggestions that came up during the event.

October – US economy grew in 3rd Quarter, Obama Administration Orders Pay cuts for top bank employees, Microsoft releases Windows 7

October was a big month for the global economy with the announcement that US GNP grew at an annual rate of 3.5% in the 3rd quarter of 2009, the first growth the world’s largest economy had seen in over a year and another sign that the US was coming out of recession. As well giving a further boost to equities the news lead to the Dollar strengthening against the Euro and other global currencies as investors speculated that the Fed would begin rising interest rates ahead of it’s European counterparts. In the months that followed October’s news the Euro did rally back initially in late November/ early December reaching highs of $1.51 against the dollar. However this strength was short-lived and since then further encouraging news from the US combined with debt worries from Greece and other European countries has seen the Euro fall sharply against the Greenback, falling 10% to now stand at $1.36.

As a sign of things to come the Obama administration took a hands on approach to dealing with Bankers pay when announcing in October that the top 25 earners at the seven companies that received the most TARP bailout money would have to take massive pay cuts. While final details were not announced word on the Street was that these paycuts would average up to 50% for top earners. The targeted companies included Citibank, Bank of America, AIG and General Motors. This was the first of several moves by the Obama administration to ease the political fallout of the massive bailouts the US taxpayer had provided to leading financial institutions over the previous 12 months. As these banks started to get back to normal and were once again making massive profits Obama moved quickly to prevent a return to the massive salaries and bonus payouts that were the norm in the past.

October also saw the official launch of the long awaited Windows 7 from Microsoft. After the disaster that was Vista released just 3 years earlier Microsoft was under massive pressure to come up with a winner this time round. And by all accounts it has done, supported by an excellent advertising campaign which sees ordinary punters taking the credit for the new features, Windows 7 has received excellent reviews from tech analysts, bloggers and most importantly users of the new operating system. And more importantly for us traders the shareprice has responded positively aswell. Microsoft’s shareprice jumped over 5% the day after the official launch of Windows 7 to retail stores on October 22nd. And despite a few minor pullbacks along the way it continued it’s upward move until peaking at $31.50 at the end of December – an almost 20% rise following the launch of it’s new operating system. Like most stocks Microsoft has got hammered over the last few weeks and is now back down at just below $28. If you take a look at the chart below this looks to be an attractive entry point for a long trade on Microsoft, just above the lows of early November. Assuming the recent lows around $27.50 hold a move back up towards $30 looks a likely outcome. However be careful to keep a tight stop just below these lows as if the price does fall below this level expect the gap following the the Windows 7 launch to be closed.

Microsoft Chart - Click to Enlarge

November – Gold Hits All Time High,  Dubai Debt Crisis

November kicked off with Gold hitting a new all-time high early in the month when it traded at $1,097 an ounce, surpassing it’s previous high of $1,033 hit back in March 2008. The record price was traded after the announcement that the IMF had successfully sold 200 tonnes of gold to India’s central bank. The sale accounted for nearly half the 403 tonnes the IMF had planned to sell over the coming years and continues a trend of central bank’s throughout the world looking to diversify from holding their reserves predominately in US Dollars. As the US continues to print dollars to spend it’s way out of recession countries such as China, India and Russia have been looking to move away from holding their reserves in what they perceive to be a weakening currency thus driving the demand for Gold. Following this new high set in early November Gold prices continued to rise, finally peaking a month later on December 3rd at $1227 an ounce, a massive 30% increase in the price of the precious metal since last August.

No doubt another factor in the run-up in Gold prices was the Dubai Debt Crisis that hit the news in late November. The news that Dubai World, one of Dubai’s largest property companies which had liabilities of over $59 billion was seeking to delay debt payments sent world markets plunging, with shares in Middle East markets and banks particularly hard hit. At the time much confusion existed as to whether the state of Dubai itself was in trouble but soon clarification came through that Dubai World was an independent company, albeit one with close ties to Emirate State’s ruling family. After the initial sell-off in stocks and indices around the world the markets quickly recovered when it became clear that the crisis at Dubai World appeared to be an isolated case and relative to some of the bailouts provided to US banks in 2008 was really not that big a deal. In the end Dubai’s wealthy neighbour Abu Dhabi, holder of the world’s 6th largest crude oil reserves, came to it’s rescue, providing it with a $10 billion bailout. For many the crisis was a clear example of how Dubai, a country with very little natural resources of it’s own, had over-extended itself in a property boom that made our own here in Ireland look tame by comparison! From a trading perspective it offered many the opportunity to once again short the markets for some nice gains before they recovered to carry on their upward journey.

December – Tullow continues to find oil in Jubilee, Markets Continue to Rise into year end

Tullow Oil had another very strong year with the stock doubling from it’s open at 650p in January to it’s close at 1300p on December 31st, proving once again that Aidan Heavey’s company is a true Irish success story. In December Tullow followed up previous announcements of oil finds in Ghana’s Jubilee oil field with yet another announcement of more drilling success, this time at the Mahogany Deep-2 appraisal well. Tullow is the largest stakeholder in the Jubilee oil field which is already the largest oil field to be discovered in West Africa in the last 15 years with an estimated 1.8 billion barrels of oil. When combined with it’s recent finds in Uganda it is easy to see why it’s share price has risen so dramatically over the last year. Whether or not there’s further upside in the stock is hard to say after such a large rise in such a short period of time but it would be a brave investor who would bet against Aidan Heavey’s company continuing to come up with the goods.

Finally to wrap up December and 2009 the markets continued to rally strongly right up to the year-end, with the DOW finishing up the year at 10,400, a 19% increase over the year and a massive 60% rise from it’s lows of March 6th. The S&P 500 did slightly better over the year, closing up 23.5% from it’s close 12 months earlier and up 67% from it’s March lows. The Nasdaq performed the best of the 3 major US indices, rising 54% during 2009 and just shy of 80% from it’s March lows. All in all not a bad year after the disastrous 2008 when the major indices all fell around 35% during the year. Here in Ireland the ISEQ held up well when compared with the main international markets, closing 2009 up 29%. That compares well against the FTSE 100 which rose 20.5% and the Eurofirst 300 (the main European index) which was up 24% but still at around 3,000 the ISEQ  remained almost 70% off it’s summer 2007 highs.

Right that wraps up my look back on 2009, in mid-feb it’s about time I hear you say! I hope you found it a useful look back at some of the news stories from home and abroad that helped shape the markets last year. I’ll be back with my normal posts later in the week.

Until then,
Happy Trading,
SpreadTrader.ie : -)

Hi Everyone,

Following on from Part 1 of our review of the 2009 trading year lets kick straight on with Part 2 which covers May to August.

May – Change at the top for the Indo, US Bank Stress Test Results Announced, Intel Fined €1 billion

May saw the retirement of Sir Anthony O’Reilly as CEO of Independent News and Media. After 36 years as head and the main driving force behind the Indo’s global expansion Sir Anthony stepped aside and handed over the reins to his son, Gavin O’Reilly, who was the company’s COO for the previous 8 years. Gavin took over a company going through tough times which was battling tough advertising conditions in Ireland and abroad, a massive debt which needed to be successfully refinanced and a floundering share price – down over 90% since the highs reached in the summer of 2007.

May was also a big month for the leading US banks with the results of the Bank Stress Tests announced and for some they weren’t pretty reading. Following a review of the 19 biggest American financial institutions US regulators found that 10 of them needed to raise a combined total of almost $75 billion in extra capitalby November 2009. This massive figure was actually less than what some market analysts were expecting and as a result had little or no effect on the markets continued recovery. Bank of America accounted for almost half of the total required with an additional capital requirement of $34 billion! Other banks told to raise several billion included Wells Fargo ($13.7 billion), GMAC ($11.5 billion) and Citigroup ($5.5 billion).

In other news in May, following an 8 year investigation the European Commission levied a record €1.06 billion ($1.45 billion) fine on Intel, the world’s largest chip manufacturer with approx 80% of the computer chip market. The Commission found that Intel impeded competition by offering rebates to computer manufacturers such as Dell and HP if they purchased almost all (in the region of 95%) of their chips from Intel rather than rival Advanced Micro Devices. Interestingly the news of the largest fine every imposed by the EU had little or no effect on Intel’s share price, with the stock falling a mere 20 cent on the day, or less than half a percent. Probably not a surprise given that the $1.45 billion fine represented less than 5% of Intel’s 2008 annual revenues of $37.6 billion and the company has almost $13 billion in cash on it’s balance sheet. In fact Intel’s share price rose a further 30% by year end. But perhaps the biggest winner in this particular ruling was AMD, with Intel under pressure to be better behaved going forward under the close eye of EU competition regulators AMD is obviously in a better position to start eating into Intel’s dominate position. At least the market seems to think so with AMD more than doubling since the May ruling.

June – GM Goes Bust, Swine Flu Takes Off

June kicked off with General Motors, the 100 year old car manufacturer, filing for bankruptcy. It was the 4th largest bankruptcy filing in US history and the largest for an industrial company. As part of the restructuring plan put in place for the company GM received over $30 billion in assistancefrom the US Treasury with the US government taking a 60% stake in the new GM. The restructuring will also see GM cut four of it’s  brands including Pontiac, lay-off over 20,000 employees andcut it’s dealers from over 6,000 to around 2,500. GM’s bankruptcy follows on shortly after it’s rival Chrysler had also filed for Chapter 11 in April of this year.

June was also the month when the World Health Organisation announced that swine flu (the HINI virus) had become a global pandemic after it had spread to 74 countries and killed 144 people. Despite all the coverage and fears of a massive increase in the spread of the disease it had little or no effect on global markets.

July – US Banks Announce Massive Q2 Profits, Microsoft and Yahoo Team Up To Tackle Google

Just a few months after repaying the billions in bailout money they received from the Feb, several of the US’s biggest financial institutions posted massive Q2 profits. Goldman led the charge announcing profits of $3.44 billion. Next up was JP Morgan with profits of $2.7 billion. But it wasn’t just the big investment banks that had returned to making massive profits, Bank of America and Citibank were not to be left out either, reporting profits of $3.2 billion and $4.3 billionrespectively. The results were better than many analysts were expecting and helped the argument that the world’s financial market’s were at last stabilising. The results also helped halt a pull-back in the major US indices which had seen the DOW fall 10% in a month.

July also saw the latest instalment in Microsoft’s on-going courting of Yahoo! as it tries to gain further market share from Google in the lucrative online search market. With Yahoo! struggling to make any in-roads into Google’s dominance Microsoft launched it’s own rival search engine, Bing. Microsoft then followed the launch of Bing up with an announcement that it had signed a 10 year deal with Yahoo! which would see Bing become the exclusive search engine for all Yahoo! sites. So what does all this mean for the online search market? Well while Microsoft is certainly making some progress, Google is still the boss and Yahoo! continues to drift and count the cost of turning down Microsoft’s massive $44.6 billion bid for the company in February 2008. Today Yahoo! has a market cap of about half what Microsoft bid for the company 2 yrs ago. I wonder how long it will be before Microsoft comes back with a new offer for the former search engine giant?

August – C&C buys Anheuser Busch Assets, BernankeGets A Second Term

In one of the bigger acquisition deals by an Irish company in 2009 C&C announced in August that it had reached agreement to buy the Irish and Scottish assets of Anheuser Busch for €205 million. The deal gave C&C the right to distribute well known beer brands Tennents, Stella Artois andBecks in Ireland, Northern Ireland and Scotland. The deal was well received by the market withC&C’s share price rising from around€2.00 a share to over €3.00 in the month following the announcement.

Also in August Ben Bernanke was nominated for a 2nd term as Chairman of the US Federal Reserveby President Obama. Bernanke was arguably the most important man in steering the US (and World) economies out of the worst recession since the Great Depression of the 1930’s. The 56 year old’s nomination for a 2nd term in charge of the Fed was an obvious vote of confidence from Obama in the job Bernanke was doing but also served as an example of Obama following through on his pre-election promise to move away from the bi-partisan politics that had become commonplace in the State under previous administrations. Instead of putting a Democrat into the hotseat Obama instead decided to stick with the man he believed was most qualified for the job. Bernanke’s approach to rescuing the US from another Great Depression was to pump trillions of dollars into the ailing economy, to bailout the financial institutions to the tune of billions of dollars (earning him the nickname “Bailout Ben”) and to reduce US interest rates to all time time low of “near zero”. While we are still in the early days of recovery so far it looks like Ben’s approach has done the trick. Later in December 2009 Bernanke would receive further endorsement of his role in the global recover when named Time Magazine’s Person of the Year for 2009.

Ok that wraps up Part 2 of our look back on 2009, we’ll finish up the review of last year with Part 3 in the coming days. Until then,
Happy Trading,
SpreadTrader.ie : -)

Hi everyone,

Happy New Year! I hope you all had a nice Christmas and wish you all the best in your trading for 2010. As we start into a new trading year I thought I’d start 2010 with a post taking a look back at they year that was and look at what for me were some of the highlights (and a few lowlights) of the 12 months just past.

It was certainly a year jam-packed with news - one where equity markets hit lows not seen since 1998, gold hit record highs, the worlds governments bailed out their banks and the US’s largest car manufacturers flirted with bankruptcy for most of the year, to name but a few of the news stories that traders had to deal with in 2009. Below is a month by month review which looks at some of the key news stories that hit the headlines each month. As this post would be rather long to cover the full year altogether I have decided to split the post up into 3 sections, first up January to April. Later in the week I’ll post May to August before finishing up with September to December. As always if you want to add some highlights of your own feel free to use the Comments box below.

January – Obama Takes Office in US, Anglo Nationalised

Believe it or not the markets actually got off to a positive start in January (well only for about a week!) as investors looked forward to a new era of growth for the US under their new Commander In Chief, Barack Obama, who was sworn in on January 20th. Obama had set out many goals as part of his election campaign including health reform and closing Guantanamo Bay but top of his list for his first few months in office was getting the US economy back on it’s feet and much needed job creation. As the year progressed Obama quickly found out the pressures that come with leading the world’s most powerful nation.

Closer to home, 2009 was starting off even worse than 2008 ended, with January seeing the Irish Government finally giving into the inevitable and announcing the long overdue nationalisation of Anglo Irish Bank. Needless to say the news led to a massive sell-off in the other Irish publicly quoted banks with AIB falling a massive 85% in the following days to a low of 25 cent, BoI falling over 70% and Irish Life & Permanent falling 55%. Those brave enough to buy in at these low levels were well rewarded for their risk with with AIB and BoI up over 10 times their January lows by October and IL&P up 5 times it’s January lows. Of course there were many big pull-backs along the way to those October highs, making the Irish banks some of the hardest stocks to trade in 2009. I expect more of the same volatility in 2010 as the market tries to figure out what impact NAMA is going to have on the Irish banking sector.

February – Consumer Confidence Hits All Time Low, The Month of the Stimulus

Driven by a deteriorating business market and rapidly increasing unemployment, the US Consumer Confidence Index sank to an all time low of 25.3 in February, the lowest level since the measure was first taken in 1967. The news confirmed the market’s worst fears on the impact the recession was having on the US and other major economies.

As global markets continued to plummet the US decided to spend their way to stability with February seeing Obama signing a $787 billion stimulus package into law. While it didn’t bring an immediate end to the falling stock markets as the months passed and the benefits of billions in tax cuts and capital spending started to flow into the economy it ultimately led to a recovery in equity markets as the year progressed. It was also one of the main contributors to a weakening US Dollar which went from $1.25 against the Euro at the time the stimulus package was announced to over $1.50 by early December before recovering somewhat in the last couple of weeks.

March – Markets Go Into Freefall, Madoff Sentenced, CRH Raises Cash

The major US and global stock markets hit their low on March 6th, the DOW eventually 6,440. This signalled the button of a steady decline (and at times not so steady but more complete freefall!)  in equity markets which began in October 2007. From it’s highs of over 14,000 the DOW fell 54% before beginning it’s rebound in March of last year. Since then the DOW, S&P 500 and Nasdaq have all risen over 60% in a steady recovery fuelled by record low interest rates in the US and a weak dollar. Click on the chart below to have a closer look at how the DOW preformed in 2009.

DOW 2009 Chart (Click to Enlarge)

March was also the month when Bernard Madoff pleaded guilty to 11 counts of fraud and admitted his investment fund was actually one massive Ponzi scheme. Exact losses suffered by Madoff’s clients are hard to quantify but are believed to be in the region of $18 billion. He was subsequently sentenced to 150 years in prison in June of last year.

At home Ireland’s largest publicly quoted company, CRH, successfully completed the largest rights issue in the history of the State, raising €1.24 billion through the sale of new shares. Given that the rights issue was launched in the middle of the credit crunch the fact that it was over 94% subscribed was a massive vote of confidence for the company. The money raised is expected to be used to pay off €500 million in debt and fund future acquisitions. The run-up to the rights issue saw a big fall-off in CRH’s share price, dropping to below €13 per share at one point in March before rebounding strongly throughout the rest of the year to close 2009 above €19.50 (a 50% increase from its year low).

Also at home, after a High Court appeal Kerry Group eventually completed the €140 million acquisition of Breeo Foods, owner of the Dairygold, Shaws meats, Mitchelstown cheese and Galtee rashers and sausages brands.

April – Japan Announces Stimulus Package, Another Budget for Ireland, Tysabri News Sends Elan Higher

Hot on the heels of the US, the world’s second largest economy announced it’s own stimulus package to help improve it’s faltering economy. Japan’s stimulus package totalled 10 Trillion Yen (or almost $100 billion).

At home Brian Lenihan announced details of Ireland’s 3rd budget in 18 months, one of the most severe in the history of the State aimed at restoring the public finances.  Some of the main measures introduced were:

• The income levy rates doubled to 2%. 4% and 6% and the entry points for each rate reduced
• The health levy rates were also doubled to 4% and 5%
• Mortgage Interest Relief only available for first 7 yrs of the mortgage
• Capital Gains Tax increased from 22% to 25%
• Increases in excise duty on cigarettes and diesel (petrol and drink off the hook)

Also in April an announcement from Elan and partner Biogen Idec outlining new research data showing the potential for their Tysabri drug to reverse damage caused by multiple sclerosis sent shares of the Irish pharmaceutical company higher. This news combined with ever increasing rumours of expected partnership with a major pharmaceutical company sent shares rocketing up 50% over the following 5 weeks.

Ok, that wraps up Part 1 of our 2009 review, until Part 2,
Happy Trading,
SpreadTrader.ie : -)

Hi everyone,

As the markets wind down for the Christmas break I thought I’d take a quick look at how the DOW to see how it has been getting on over the last few weeks. If we take a look at the chart below it’s clear that it has settled into a very narrow trading range since early November, trading pretty much between 10,200 and 10,500. This trading range has offered traders some excellent opportunities for low risk trades. Over the last few weeks I have gone long twice at just above 10,200 with my stop 100 points below, closing out both trades at between 10,400 and 10,450. I have also shorted the DOW twice over this period, once right at 10,500 and more recently at 10,450, again keeping a stop 100 points above and taking profits towards the bottom of the trading range. They may not be the most exciting trades I have ever opened but in the run-up to Christmas when we all have a lot on there’s a lot to be said for a few easy trades that sort of just look after themselves.

10,500 Is Starting To Look Like Major Resistance

As the weeks pass and the DOW continues to fail to break the 10,500 mark in any meaningful way it starts to look more and more like serious resistance. Since it first flirted with 10,500 about a month ago the DOW has traded above 10,500 on 7 different trading days but in all cases it failed to close above this mark by the time the market had closed (the closest being December 14th when the DOW Futures closed at 10,498). I can’t see there being any major movement over the next week or so as many traders (including myself!) will be off for the Christmas period. So I’d expect the DOW will tick along in it’s current range, not move too far from the 10,400 mark. But when traders return to their desks in January that will be when things should get interesting. While the primary trend is still up, a couple more failed attempts at breaking above 10,500 could see a significant reversal.

DOW In Nice Trading Range For Last Month (Click to Enlarge)

Will January See Fund Managers Book Profits?

Since the markets now infamous low on March 6th the DOW has risen a massive 60% so one has to question just how much more of a “recovery” there will be. Clearly things are improving in the US and globally from where they were 9 months ago but I’d still question if we are fully out of the woods yet. Every time the US Fed has suggested that it will be cutting back it’s support in the not too distant future the markets have reacted by selling off sharply. Over the last few months record low interest rates in the US (near zero) and a weak dollar have helped push equities up as investors rotated their money back into riskier assets in search of higher returns. Will January see this trend continue or are fund managers going to be thinking more along the lines of booking some of the massive gains they’ve managed over the last few months. This years massive sell-off from January to March is still very fresh in the minds of many traders and I don’t think it would take much for them to start another round of selling should things get a little jittery in the new year.

If we take a look at the 1 year DOW chart below we can see how it’s recovery since March has seen a narrowing upward channel develop. As this channel comes to a point over the coming weeks it will need to resolve itself one way or the other, either to the upside with the DOW pushing on to new highs or to the downside with a renewed bout of selling.

DOW In Narrowing Trading Channel (Click to Enlarge)

As always my advice would be to not try second guess where the markets might go next but instead be open minded and trade what the chart is telling you, all the time looking to minimise you risk on each trade.

I’ll be back next week with a “Review of the Trading Year” post which I have already started to put together.

Until then, I hope you all have a safe and happy Christmas.,
SpreadTrader.ie : -)