Hi everyone,

Just a quick post to mention an upcoming Investor Summit taking place in the new Dublin Convention Centre on the quays next Thursday (11th November) that may be of interest to readers. The summit has an interesting line-up of speakers covering a wide range of different types of investments from stocks, property, cash, bonds and of course spread trading!

It’s on from 4.30pm to 7.30pm so it won’t take up too much of your day. For full details of the speakers and the topics they will be covering can be found here.

The event is sponsored by MarketSpreads and they have kindly offered 10 free tickets to SpreadTrader.ie readers (normal price is €95). So if you are interested in going along drop me an email at info@spreadtrader.ie with your name, address and the number of tickets you would like (max of 2 person). Unfortunately due to travel commitments I won’t be able to attend myself but I’m looking forward to hearing how it goes, maybe those who attend could use the comments box below to share their highlights / thoughts of the event.

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,       

I’ve been busy these last few weeks with work, travelling and some holidays thrown in aswell. All of which has meant I haven’t had any spare time to write new posts. It’s been a busy time on the news front during this period and so I thought I’d get back into the swing of things with a look at a few stories which made the headlines that caught my eye. I’m going to split this into two parts, today taking a look at some of the Irish companies making the news recently with the release of their half-yearly resultsand later in the week covering some of the big stories from the US including Intel’s recent buying spree, HP’s CEO stepping down, BP finally plugging it’s oil spill in the Gulf of Mexico and BHP Billiton’s hostile takeover bid for Potash.

Poor Results From Heavyweight CRH Drags ISEQ Down

But first on the home front there has been lots of results and trading updates making the news over the last few weeks with mixed fortunes for the companies involved. A couple of weeks ago CRH announced disappointing half yearly results which saw it’s shares slump 16% on the day, dragging the ISEQ down almost 6% in the process.  Pre-tax profits of just €25m were down 77% on the €108m achieved during the first 6 months of 2009. The main reasons given for the slump in revenues and profits appear to be due to worst than expected performance at the company’s American Materials division as spending on infrastructure in the US slows (perhaps an indication that the US Stimulus package is starting to run out of steam) and bad weather in Europein the earlier part of the year hitting demand for CRH’s products. All in all the results made disappointing reading from the ISEQ’s heavyweight company and former star performer. It appears to be the across the board revenue declines which has spooked investors the most with each of CRH’s Materials, Distribution and Products divisions in Europe and the US all post revenue declines of between 6 and 10%.

From a technical perspectiveCRH’s chart looks a broken one, the 16% fall to €11.50 on the half yearly results saw it hit lows not seeing in many years, even breaking below last March’s  €12.50 low. While the stock has staged a decent recovery since then, rising over 16% from it’s lows to pretty much pretty much wipe out that big sell-off on August 24th, it is now coming up to test an area of significant resistanceonce again. We can see from the chart below that CRH’s recovery was stopped in it’s tracks last Monday and Tuesday when the market sold off as soon as the share price had rallied back up to the breakdown level at just under $14.00. The stock looks set to make another attempt to break above this resistance level this week which if rejected again could lead to another sell-off back towards the August lows.

CRH Daily Chart - (Double Click to Enlarge)

CRH is clearly in a down-trend. Since making it’s 12 month high of €22.60 back in April we can see that the stock has made a series of lower highs and lower lows over the last 6 months, so until we see a reversal of that trend any long positions should be tightly managed. That said I don’t think I would rush out and short it either because in maintaining their interim dividend at 18.5 centthe company has given an indication that it may not cut it’s full year dividend this year. If that follows through and CRH’s full year dividend comes in at, or even close to, last years 62.5 cent then at current levels the stock is yielding around 5%. That should be enough to act as some sort of support for the share price, particularly as pension funds will look for high yielding dividend stocks for their portfolios in these volatile times.

Indo’s Results Benefit From Improvement In Advertising

There was better news for Independent News and Media with their half yearly results up 40% on the same 6 months in 2009. The group made pre-tax profits of €53.3m on revenues of €656m driven by a gradual improvement in advertising revenues and one of gains achieved by the sale of the London Independent and it’s stake in Indian publisher JPL. While no interim dividend will be paid CEO Gavin O’Reilly announced that the INM is targeting full-year profits in line with market expectations. While these results are certainly encouraging coming on the back of a few years of very challenging trading it should be noted that INM still has net debt of close to €1billion. The disposal of JPL allowed €32m to be repaid off this debt but on-going cash generation will be vital for the company if financing of this debt is to be maintained.

Independent News & Media Daily Chart (Double Click to Enlarge)

Technically that INM chart is a rather unusual one due to the 7-1 reverse split which took place last June. That share consolidation is clearly evident on the chart where the price jumped from a 10-15 cent range to the 60-90 cent range it has been trading in since the reverse split. The market has reacted well to the results with the share-price up about 10% since they were announced on August 27th. A difficult one to trade due to the impact the split has had on the chart I think any long positions need to be accompanied with a stop just below 60 cent. Either way INM looks to be a slow burner and it’s one that is unlikely to lead to big profits overnight but if you feel the fundamentals will remain strong and have the patience to wait it out then a position on the December contract has the potential to offer a decent return.

Tullow Continues To Led The Way

Finally to finish off today’s post lets take a look at Tullow Oil which continues to be the star performer, announcing half yearly results which saw pre-tax profits up a massive 150%over the same 6 month period in 2009! Profits of $131m on revenues of $486m were driven by strong oil prices (averaging $78 a barrel) over the period. Looking forward performance should continue to improve for Tullow with production from it’s flagship Jubilee field in Ghana (one of the largest new oil discoveries in the world with an estimated 1.8 billion barrels of oil) expected to begin by the end of the year. However the ongoing dispute between the Ugandan government and Heritage(Tullow’s former partner) over unpaid capital gains tax is holding up the development of it’s Ugandan oil fields which Tullow plans to develop with France’s Total and China’s National Offshore Oil Corp and until there is a resolution to this dispute there is likely to be some overhang on Tullow’s stock.

Tullow Oil Daily Chart (Double Click to Enlarge)

Looking at the chart, Tullow will need to clear resistance at 1325p in order to continue on to new highs but given the momentum behind this play (up from 400p in late 2008) that seems very likely. We can also see from the chart above that the MACD indicator looks set to turn positive in the coming days which would be another bullish indicator.

Right that wraps up this post. Part 2 later in the week will see us move State-side to review some of the news moving stocks over there.

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

Hi everyone,

A slight change from my normal posts this time round I wanted to share details of an excellent resource I was introduced to recently. A few weeks back I attended an Advanced Technical Trading seminar hosted by MarketSpreads in their offices and delivered by PJ Henry. PJ is a professional trader with many years experience and delivered a very enjoyable and informative session.

After chatting to PJ during that session I decided to sign-up for one of his upcoming day-long currency (forex) trading course which he delivered out in Bewleys Hotel in Newlands Cross a couple of Saturdays ago. That too was another very well delivered training course. I have been spread trading for 4 or 5 years now and have mainly focused on equities and indices. From time to time I’d trade currencies but without ever having put in any proper research in trading strategies and approaches. So when the opportunity came along to attend PJ’s forex course I thought I’d give it a go. PJ has an excellent delivery style, he explains things well, gives good practical real-life examples to backup the messages he is trying to convey and most importantly has plenty of time for questions. There was about 15 on the course I attended which was a nice number that gave everyone plenty of opportunity to ask any questions they had while at the same time ensuring there was enough people there to lead to some healthy debate on different trading approaches which I enjoyed. Since the course I have been trying out some of the forex trading systems covered and so far most are working out well.

For those of you who are perhaps struggling with your trading or just want to learn some new trading techniques I think you could do a lot worse than get in contract with PJ with the view to either attending one of his trading courses or signing up for some private mentoring & coaching from someone who trades full-time for a living. You can get some more information on the services available on StockActive.ie or by emailing PJ at PJHenry@stockactive.ie.

Happy Trading,
SpreadTrader.ie : -)

Hi everyone,

It’s gone by much quicker than I thought but believe it or not SpreadTrader.ie is one year old today!  When I started the site I didn’t know how long it would last, how often I would post or what shape those posts would take, but so far so good, the first milestone of 1 year on the go has been reached. It’s been an interesting year for me, combining the day job with my trading, research and writing blog posts certainly has been tough at times but definitely an enjoyable and worthwhile experience, from my perspective at least. The incentive of continuing to post new and (hopefully!) interesting topics has forced me to read-up and research new stocks, trading techniques, websites and books and so much more which can only be a good thing as I try to improve my own trading performance. I hope you have enjoyed reading my blog posts as much as I have enjoyed writing them.

Some Stats From SpreadTrader’s First Year On The Web

For those interested I picked out a few stats from my first year on the web, courtesy of Google Analytics:

• The most popular blog post over the last year was A Look At Bollinger Bands. Other popular posts included The 10 Golden Rules of Spread Trading, the Ryanair Chart of the Week post and Natural Gas - How Low Can It Go.
• Visitors spend an average of 4 minutes on the site.
• As you’d expect Ireland accounts for the vast majority of all visitors with 54% followed by the US (13%), the UK (9%) and Australia (7%).
• All in all SpreadTrader has had visitors from 99 different countries!
• Most visitors either come from Google (40%) or directly (34%) or from Askaboutmoney.com which accounts for an impressive 7% of all visitors. Thanks to those who have given SpreadTrader.ie a mention on Askaboutmoney, much appreciated.

So what for the next 12 months?

Well initially I plan on continuing on with more of the same, posting as often as I can about everything from stocks, commodities and currencies I’m following, current news that’s impacting the markets and different approaches to trading and technical analysis. Based on feedback from several regular readers I am planning to move towards shorter, more regular posts which will hopefully be easier/quicker for me to write therefore allowing me to post more often. I also have some plans to give an overhaul to some of the static sections of the website to provide some additional information and resources.

As always if there is anything in particular you’d like to see covered on the site or as part of a blog post just drop me an email at info@spreadtrader.ie or use the Comments box below. Also for those not aware you can subscribe to the RSS feed of new posts by clicking on the Subscribe tab on the red box on the right (a few people have mentioned they didn’t know it was there, I should probably make it a bit more prominent at some stage). Right I’m off to get some birthday cake!

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, so here are rules 6-10 of my 10 Golden Rules of Spread Trading. For those that missed rules 1-5, you can read them here.

6.  Never Try Catch A Falling Knife

This is another very important rule, whenever you see a share falling fast (because of some bad company news, results or whatever) there is always a temptation to jump in there and buy it. Sure everyone loves a bargain! Attitudes range from “The market has over reacted!” to “It is sure to rebound tomorrow”.

The problem is that most of the time “catching these falling knives” as the professionals refer to them is not a bargain at all. In many cases big share price drops of 20% plus in a single day is just the first leg down in what often turns out to be a move towards much lower levels. There is no doubt that sometimes you will get a snapback or rebound in the share price almost immediately, but opening trades with this hope in mind is not good practice. Sometimes there may be a few days where the share rebounds somewhat, but usually before very long it will start falling back again and end up going even lower.

There are loads of recent examples of these so called “falling knives”, take any of our Irish banks or any major bank globally for that matter and look at it’s share price over the last 12 months and you’ll see falling knife after falling knife! Think of the amount of media commentary on the likes of Bank of Ireland when it’s share price fell below €10 for the first time in years, how it was a great bargain, then think of when it fell below €5 for the first time a few months later, or €3 not long after that, or even when it fell below a €1 for the first time….all the talk of this being the bargain of our lifetime…in the long run it may well turn out to be a great bargain but short-term the facts are that it continued to fall until eventually hitting a low of just 12 cent per share in March. The point of this example is to show you what is meant by trying to catch a falling knife, it will only end in injury. No one can predict the bottom so the best trading approach in these kind of scenarios is to just trade the trend, if it’s falling, short it. If you think it’s a great bargain and want to buy it, wait until the market agrees with you and the price is clearly back in an uptrend. Don’t worry about missing out on not getting in at the very bottom.

7.  Know when you are Wrong (and Right)

Linked to several of the earlier rules (moving your stop loss, catching a falling knife, trading against the trend) is the idea of knowing when to get out. If you open a trade and it quickly becomes clear that you called it wrong, close it. Don’t continue to hang in there hoping the things will change and you’ll be proved wrong. If it is clear you made a wrong call then just close your position, you don’t even have to wait until your stop loss is hit, although if you have set your stop loss at a particular level for good reason then it may be worth letting it play out. The most important thing is not to move your stop so as to give your trade more time to turn round.

All the best spread traders have losing trades. It was best explained to me before that you’d be better off having 5 trades where you lost €100 on 4 of them and made €500 on the 5^th than having 5 trades where you made €100 on 4 of them but lost €500 on the 5th. In my own personal trading I firmly believe in this approach, I open lots of trades (for smallish stakes per tick) where I set fairly tight stop loses. I am happy (well maybe happy is not the right word…more accepting!) that several of these trades may get stopped out with small €100-200 losses as long as the ones I get right result in my making €500 plus.

Related to this point is the idea of also knowing when you are right. Sometimes when you open a trade and it is going really well for you, you are up a few hundred euro, it can be very tempting to take your profits and run. While it is very true that you’ll never go broke taking a profit on every trade, it is important to look at a trade objectively, just as it’s important to cut your losses, it is equally as important to let your winners run. If you have opened a trade which is clearly trending in the right direction for you, resist the urge to close it out too soon. Often these shares can continue to trend in that direction a lot longer than anyone would expect. Certainly move your stop up as you go to lock in certain profits, but keep it at a level where the share still has time to move about a bit but ultimately continue its trend upwards or downwards.

8.  Always Buy Near Established Support

I plan on cover more detailed examples of support and resistance over the coming weeks but for now I just want to touch on it as part of these 10 Golden Rules. Support is one of the many technical analysis concepts and basically means that when you look at a chart for a particular share you will spot areas of support for the share price. Let’s say a particular share has generally being trading in a range of between €10 and €15 over the last 12 months. Every time the share comes down to the €10 mark, rather than continue to fall further, it moves back higher. €10 would then be considered an are of support for this share. The more often the share price rebounds of the €10 mark the stronger the support becomes. As a trader therefore you should be looking to buy (or go long) the share close to the €10 mark and you should be placing your stop close underneath it (lets say €9.50). If you can open a trade at lets say €10.20 a share, you are hoping €10 will again act as support and if the share price rebounds you would be looking to book profits near the €15 mark (the price that has acted as resistance in the past.

Related to this concept is the idea that when a share price does break through established support it tends to fall hard and fast (often seen by traders as a good shorting opportunity). The reverse is also true, if a share price can break through established resistance then it tends to move higher from there quite fast and this is often a good point to Buy (or go long).

9.  Know your Risk Reward Ratio

Throughout a lot of these rules we talk about managing your capital and managing your risk. Part of all this is the idea of keeping an eye on your Risk Reward Ratio whenever you open a trade. The best way to explain this is with a couple of examples.

Lets say your opening a trade (€1 per tick) on a particular share at €15.00 (1500) and you put your stop at €10.00 (1000) - that’s where you think support is and you are hoping to take profits at €20.00 (2000) - that’s where resistance is at. In this kind of trade your max win is €500 and your max loss is €500. So your Risk Reward Ratio is 1 to 1. Effectively 50/50, or the flip of a coin, not good odds at all and not a good trade to be opening up.

Instead if you can open a €1 a tick trade in the same share with a buy price of €11.00 (1100) and your stop is still set at €10 (1000) and profit target is still at €20 (2000). In this scenario your max win if the trade goes as planned is €900 and your max loss if your wrong is €100. That’s a Risk Reward Ratio of 1-9, a much better trade to be taking on. Your risking €100 but have a profit target of €900. That’s more like it!

Hopefully from this example you will see the benefit of opening up 4 or 5 trades like this where if lets say three of go against you and you lose €300-400 but you get two right and you make €1000 plus.

10.  Learn From Your Mistakes

And last but certainly not least is the importance of learning from your mistakes. As mentioned above all good traders have losing trades, the important thing is that you learn from each one of them. What did you do wrong? Did you open the trade too soon? Was your stake too big? Were you going against the trend? Etc, etc..

And it is just as important to learn from your winning trades too, what did you do right, where you just lucky, etc, so that you can feed that knowledge into your future trades.

On this point one thing I would strongly recommend to all traders is to keep a log of all your trades. Overtime as you trade more and more you will forget your early trades and the lessons learnt from them. A spreadsheet will do the job nicely. For example in mine I track the following on each trade I open:

• Trade (name of share, index, commodity, etc and whether I’m Long or Short)

• Date (Date I opened the trade)

• Trade Price (Price I open the trade at)

• Close Price (Price I closed the trade at)

• Points Difference (Close Price – Trade Price)

• Stake (€ per tick)

• Profit / Loss (Points Difference x Stake)

• Notes on Trade (a few bullet points on how the trade went)

Overtime a spreadsheet or diary along these lines will become one of your most important assets.

So there you go, I hope these rules help somewhat. I am sure I’ll think of one or two more as soon as I hit Publish on this post! But sure 10 is a nice round number so we’ll go with that for now and if I think of any other important trading rules that you should consider following I’ll cover them in a later post.

Happy Trading

SpreadTrader.ie