FuturesTechs Blog

One of our services offered to clients is providing trade recommendations in UK equities. After taking a step back from the market last July – October when Risk Reward opportunities weren’t viable given the intraday volatility, our service has resumed and run consistently since December. Capitalising on the year end rally and move so far this year recent recommendations report solid returns. (For a spreadheet of our Trade Recs please contact us)

Our current outlook for the FTSE itself remains bullish in line with the recent trend higher although a lack of volume is worrying as we approach significant resistance as shown by the FTSE chart below.

As such, the Risk Reward for further upside in the FTSE isn’t particularly favourable so our recent recommendations have focused on short opportunities. Obviously such action is risky given the trend of the market which is why we’ve looked into stocks that have recently released fundamental news and reacted with a large increase in volume. Two such instances are Tullow Oil and Morrisons Supermarkets.

Tullow Oil has been trading within a broad sideways consolidation since September but continues to fail around 1470. After releasing an update the stock gapped lower to post an ‘Abandoned Baby’ candlestick reversal. Additionally a failure at the underside of a broken up trend line has provided an opportunity for a short trade running a stop above the recent gap lower.

Morrisons Supermarkets posted a massive reversal candle at the start of the year and hasn’t looked back since. After selling off significantly Morrisons lost further ground and gapped lower following comments from rival Tesco. A counter trend rally has returned to the 38.2% retracement and a break above short term swing highs at 298 was rejected yesterday to post a Bearish Engulfing Candle on good volume. Trade below yesterdays low begins to confirm the Bearish Engulfing candle providing an entry for a short trade whilst running a stop above the Gap.

Both these trades have been sent to our clients and although against the trend of the market their relative underperformance, fundamental news flow, and increased volume increases the probability of the trade. This is why stock selection is key.

Liam Roberts MSTA

The last few days have seen some big swings either way in Equity markets.

“Where next?” I hear you ask! Our chief market analyst Clive Lambert was on CNBC last night trying to pick the bones out of this price action, looking at the S&P 500 Futures, FTSE Futures, and suggesting Fresnillo as a Stock to buy.

See it on our media page by clicking here.

This morning’s reports on Silver and the FTSE would have reaped dividends for our clients, for different reasons.

Here’s the text of the FTSE Futures report:

We have posted the “all sessions” chart today because it’s actually a bit cleaner, and also shows what we’ve seen overnight; selling.

Selling to the 200 day MA as well, this well watched proxy sitting at 5771.5 today.

Yesterday’s low was 5827 in day session trade so this is a bold resistance above, and if the bulls don’t quickly retake this mark we will likely break through 5771.5 and head to 5615.5 then 5584.

If the bulls can dust themselves down from this weak open and get us back through 5816 and 5827 we then need to retake 5869.5 then fill the gap to 5912.

My gut tells me this weak open is a buying opportunity. The chart tells me otherwise…

Nice “gut feeling”!

Our Silver commentary was a bit more “nailed on”, and since we sent it out first thing this morning in the UK it traded up to 37.330 (as we tuck into our lunch in the UK, awaiting the open in the US):

Lunchtime (in the UK!) Update: We now have day session gap support at 36.400, protected by the broken resistance at 37.020, the latter having done a job in the last hour or so “on the retest”.

To request a Free Trial of our Daily Technical Analysis Reports please click here.

Individual traders can have a look on our website on a trial basis by clicking here.

Last week we posted a Blog about the potential Head and Shoulders pattern forming in the FTSE Futures. Things got interesting with respect to this yesterday, which was the crux of our morning report, reproduced below.

The fact that we’re not breaking this line PROPERLY does suggest the market’s ambilvalence is set to continue.

Towards the European close yesterday we were selling off, and we’d got through 5858, the Neckline of the Head and Shoulders pattern that we’ve been watching of late. So on the “Day only” chart that we prefer, as above, we have a slight closing break of this Neckline, and a sell signal.

Except we’re called 50 higher this morning and this will instantly tell us that the sell signal is a false one.

It looks like the market is happy in it’s current moribund range-bound confused stupor, and we’ve got to put up with this situation for a bit longer.

We’re not getting any firm signals at the moment, then, and this counts for the Individual stocks as well, making our (and your) job a rather tough one.

Trial for Professional Traders/Brokers and Fund Managers, click here.

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Below is the Comment and Chart from today’s FuturesTechs report. As well as this we provide Support and Resistance levels from our own analysis, as well as “Automated” levels referencing Market Profile, Pivot Points and Moving Averages.

If you would like a free trial of our daily technical analysis reports please click on one of the links below:

“Professional Trial”, for Traders, Fund Managers, Brokers etc click HERE.

“Website Membership” for Individual traders, suitable if you’re Spread Betting or trading CFDs click HERE.

From yesterday: “Backing either camp is proving difficult in this volatile environment so our Skew turns neutral’

Sideways consolidation at multi month highs remains the story, albeit in a volatile environment. The dip below the previous days low found buyers at 1328.75 who rallied the market up to 1348.75, the previous breakdown level, on good volume.

Yesterdays low validates an up trend line from the low on the 14th March. Today this trend line provides support at 1330.50. Yesterdays downside rejection in conjunction with the validation of the up trend line means our Skew switches to tentatively bullish above 1330.50.

We have sent an extra report to our customers this morning, outlining the POTENTIAL sell signal that’s looming in the FTSE Futures. Here is the text and accompanying chart:

We have a potential “Head and Shoulders” pattern forming in the FTSE, although the sell signal has not been given yet.

The sell signal comes if we break the “Neckline” which is at 5851, and probably on a closing basis as well (although a “clean” break on high volume would convince me enough to take the signal “intra-day”).

The target, using the traditional measuring technique for this pattern, would be 5600.

Of course this also comes off the back of the recent failure at 6095, which was very similar to the February high/failure (6086.5). The “Double Top” sell signal from this situation would only be triggered on a move through 5584.5, so a long way off yet….

5851 is on the radar, however, so “Watch this space!”

If you would like a free trial of our daily technical analysis reports please click on one of the links below:

“Professional Trial”, for Traders, Fund Managers, Brokers etc click HERE.

“Website Membership” for Individual traders, suitable if you’re Spread Betting or trading CFDs click HERE.

Below is a sample of a note we sent to our “Premium” clients today; those clients who receive our Trade Recommendations service covering Individual UK Stocks. We’ve gone a bit quiet on this front of late as we await some clarity from the markets. In fact it’s been one of the most frustrating periods I can remember on this front! This frustration may show in what we put out. If you are trading or Broking CFDs on UK Equities and required Technical Analysis to aid your decisions or offer ideas please let us know (clikc the link below) and we’ll set you up with a Free Trial.

http://www.futurestechs.co.uk/professional_trial/

So to today’s note:

If you’ve been wondering why we’ve been so quiet of late it’s because we’re doing lots of head scratching when looking at the charts right now. The Equity markets have been a very fraught hunting ground of late!

So with an apology for lack of recent recommendations here’s proof that we’re not just sitting around doing nothing: A list of every FTSE Stock with a line (sometime just a word!) to say what I’m seeing and why we’ve not got a conviction trade on!

AAL - Looks heavy, but is holding it’s 200 day MA (2950) and previous support in the low 29’s. Scope to 2490 if it breaks

ABF - Very rangy feel to the chart in the short term. Bigger picture suggest scope for weakness to 960 or even 920.

ADM - Hasn’t done anything since September

AGK -  Could be worth buying, looking for a hold above 1700

AMEC - Hasn’t done anything since November

ARM - Probably worth buying, but Reward/Risk isn’t right

ANTO - Looks bearish, but downside could be restricted to 1208

AU - Going sideways - No trade here

AV - Going sideways - No trade here

AZN - 200 day MA at 3095 might weigh. 3145 and 3175 also resistance

BAE - Been going sideways since October 2008!!

BARC - Breaking support at 277.50, but next support is 261, then 256, then 253. Too many supports below for a decent short risk/reward wise

BATS - Bullish, should hold 2645

BG - Broke support at 1400 last week but came roaring back. Gap above at 1498 is a worry for the bulls though.

BLND  - Slow, steady riser. Good one to hold, but buying at these levels?

BLT - Left an “Island Reversal” back in April, when we shorted it. Scratched the trade on the subsequent high. Doh!

etc etc!!

Our clients who trade Spread Bet and CFDs often seem rather perplexed around this time because the Futures are rolling over and all the talk is of “expiry”, “triple witching”, “quadruple witching”, “roll-over”, “new front month”, “rolling off the board”, “options expiry” and the like.

The Spread betting firms have simplified things over the years so you can trade something like the FTSE on a “rolling” basis; basically replicating the Index, or the “Cash” as it’s known in market parlance. So why do the Pro traders all trade the March, June, September or December Futures? What’s that all about?

By definition “Futures” are trade-able instruments that are priced depending on where the market thinks an instrument will be at some time in the future. The traditional set of expiry months for these sort of contracts has been March, June, September and December. You will find that Commodity markets are different. This is mainly to do with seasonal differences, so people can trade the crops that are about to be harvested or have just been harvested.  Saying that I’ve never understood the logic behind the Precious Metals expiry cycle so if anyone ever wants to enlighten me please feel free!

Anyway, as we write the March FTSE Futures are very close to expiring, getting to the end of their life. Futures traders who want to bet on or hedge future price movement therefore need to “move down the curve” and trade the June expiry, which is a bet on where the FTSE Index will be in mid June. The March contract is therefore “rolling off the board” and anyone who wants to keep their exposure to the market has to get out of the March position and move their interest into June. They are “rolling over” their position.

If you were to hold your Futures position into the expiry the exchange will demand that you do something to settle your contract. Many Financial Futures instruments are cash settled, so you just pay an amount of money, or (hopefully) receive an amount of money, depending on where you got in versus where the contract settled on the Expiry day. This is why there can be a big mash up in the minutes before the settlement of any contract. Futures exchanges have taken several measures over the years to calm the volatility at these times, as there have been lots of incidences of what could be described as market abuse during Futures expiries in the past.

So much so that the expiry days have taken on an almost mystical aura amongst market participants. The hour when everything expires has become known as the “Witching hour” and when you get expiry of more than one instrument it is called “Triple Witching” or even “Quadruple Witching”.

Triple Witching is when the Futures, Options, and the Single Stock Options all expire on the same day. It can cause havoc, but as I mentioned the exchanges have worked hard over the years to iron out any foibles thrown up, all in the name of keeping an orderly market. With the increased use of Single Stock Futures these can also be thrown into the equation to give you a “Quadruple Witching”.

Anyway I digress. Let’s get back to settlement of these instruments. As mentioned many contracts are “cash” settled, but some are settled with physical delivery. In Bond markets a holder of a Long Position in the Futures has to pay up the full price (forget margin at this point!!) to receive a lump of Bonds. In Commodity markets a holder of a short position in, say, Corn, would have to delivery a set number of bushells of Corn to a specified warehouse on a specified date in a certain condition. So speculators are usually pretty keen to “roll-over” their interest and not end up in this situation! I always remember working for a Broker on LIFFE and they were always very concerned on Expiry day that we didn’t have any errors that might result in having to physically delivery something they physically didn’t have!

So around mid morning on Friday if you see the markets wobble, pick up in volatility, or make a sudden unsuspected move, you now know why: Roll-over. The Witches at play!!! From this moment on the Futures traders are all looking at a new instrument; trading the June Futures, until the next roll-over.

We always suggest to our Spread Bet or CFD clients that they trade the market that tracks the Futures. for starters this is what we are analysing on a daily basis, so it is the truest reflection of what’s actually going on. Also the Futures are open (in the case of the FTSE) from 8am til 9pm every day, so you always have a “real” market price to reference off.

If you haven’t had a Free Trial of our reports before why don’t you try us out? We have been used by Professional traders for 10 years now, having first started writing our reports when the LIFFE Floor closed its doors in 2000. In fact FuturesTechs is celebrating it’s 10th birthday at the start of April.

Click here to request a free trial.

Event: 4 Practical workshops on Technical Analysis, delivered over 2 days by our chief Technical Analyst, Clive Lambert

Date: March 17^th and 18^th 2010

Place: MWB Business Exchange, Houndsditch (City of London).

Details: Join Clive Lambert for a 2 day seminar introducing the basics of Technical Analysis, then delving deeper into three key methodologies used by traders every day.

This course is suitable for anyone from a new trader to an experienced market professional wishing to expand their knowledge on essential technical tools for short and medium term trading.

These practical modules on key trading methodologies may count towards 12 hours of your FSA CPD, based on them satisfying you training requirements*.

Clive Lambert has been a central figure in the UK Futures day trading arena for 10 years now, and has taught thousands of traders how to incorporate Technical Analysis into their daily routine. He is the Author of “Candlestick Charts” and is an accomplished and interesting speaker, who delivers seminars for many organisations including the UK Society of Technical Analysts.

March 17^th - 10am to 1pm - Module 1 - Introduction to Technical Analysis/Support and Resistance - £300 (+VAT)

• Clive will explain the basic principles and the main chart types before looking into the creation of support and resistance levels, and how to spot potential turning points using methods like trendlines and chart pattern recognition.

March 17^th - 2pm to 5pm - Module 2 - Candlestick Analysis - £300 (+VAT)

• After a run through of the history and construction of candlesticks Clive will go through the 7 most powerful patterns in candlestick analysis, sharing his unique insight into the “psychology” of each pattern, and their application on whatever timeframe chart you’re viewing. Clive is one of the UK’s leading proponents of Candlestick Analysis.

March 18^th - 10am to 1pm - Module 3 - Moving Averages and Momentum Indicators - £300 (+VAT)

• These studies are sometimes overused and often misunderstood. Clive will run through the common Indicators used in by different types of traders, the mistakes that are often made in their interpretation, and the correct way to utilise these studies to enhance your trading and understanding of price movement.

March 18^th - 2pm to 5pm - Module 4 - Market Profile - £300 (+VAT)

• Originally from the Futures Pits in Chicago this methodology is extremely tough to convey, as evidenced by the pile of difficult to read books on the subject. Clive breaks down the ideas behind Market Profile and tells first hand, in a practical way, how traders in London and Chicago use this in their daily trading. He has “grown up” around traders using Profile, so understands not only the complexities of this methodology, but its benefits to day traders.

Class sizes will be limited to 12 people, so you are guaranteed training that is both relevant and “personal”. All methodologies will be discussed using live charts of markets familiar to you.

Top notch Refreshments and Lunch will be provided, as well as course notes, either in bound, full colour “paper” format or on Memory Stick.

Delegates will also get a free signed copy of Clive’s book “Candlestick Charts”.
The course will take place at the MWB Business Exchange in Houndsditch (EC3, 5 minute walk from Liverpool Street); a fantastic modern space where delegates will enjoy excellent facilities.

Book now by clicking here or call us on +44 (0) 1702 333461.

Remember, places are limited.

Or take advantage of our generous discounts:

All four modules - £1000 (+VAT), or £800 (+VAT) for FuturesTechs customers**

FuturesTechs customers** can chose individual modules for £250 (+VAT).

If you wish to discuss block bookings for any of these Modules please let us know. I’m sure we can sort something out!!

Yours,

Clive

* Check with your compliance officer prior to booking

**Discount does not apply to FuturesTechs Website customers on month-to-month contracts.

In Brief: All I keep hearing at the moment is how we will have a 10% correction, so, let’s have a look:

The “funnymentalist” community, particularly Stateside, seem pretty happy with the idea that this pullback will be a “normal” affair and will pull back 10% from the January highs, at which point you can happily pile in, buy the dip, and carry on where we left off…

I thought it would be useful to know where this level is on the markets we watch. So here goes, and we’re looking at the Cash Indexes here, NOT the Futures:

Dow: High was 10730. 10% pullback level is 9657 (currently 10023)

S&P 500: High was 1150, pullback level is 1035 (at 1065 right now)

NASDAQ: High was 1897, pullback level is 1707 (1743 now)

DAX: 6094 was the January high, 10% off that is 5485.  BROKEN

FTSE: 5600 high, 5040 is 10% pullback. 5033 was last week’s low, so holding…

Eurostoxx: Pulled back from 3044. 10% back from here is 2740. BROKEN

CAC: high was 4088, so 10% back from there is 3680, BROKEN.

So to summarise,  if anyone stateside says to you about 10% pullbacks the simple thing to say is “thanks, but we’re already beyond that!”… especially if/when the FTSE breaks 5030-40.

Keep safe in these markets.