FuturesTechs Blog

I think i did a reasonable job of explaining it on CNBC this morning (you tell me!!) so instead of babbling on too much here I’ll post the link:

http://www.cnbc.com/id/15840232?video=820121614

To summarise I said that 850 is a MASSIVE support level, and that the weakness to here is a buying opportunity, although if 850 breaks you don’t want to be long, and a “stop and reverse” (see below) strategy might be advisable.

We get “proper” confirmation of a bounce happening if resistance levels like 872.6 and 900 are retaken.

In Brent Crude Oil I mooted the idea that we might be due a bounce some time soon as we’re getting close to some important supports.

And in the Bund Futures I talked about a Double Bottom formation which gave us a buy signal last week.

I steered clear of talking about Equity markets because the short term outlook is a tad confusing, and we haven’t had the best of time calling these of late, if the truth be known.

“Stop and Reverse” is where you have a position and you get out of it with a stop order, but at the same time you do the same trade to create an opposite position.

For example say you were long five lots of Gold at 870 with a stop order at 845, that means you want to get out and take the loss on your trade if the market goes down as far as 845. A stop order is defined as a market order that’s triggered if your loss reaches a certain level or price. You should always have a stop order on any trade that you put on, and technical levels can be the best way of deciding where to place these orders.

Many people place their stop orders below important support levels (like 850 in Gold) and sometimes, if you think the move below this key level is going to trigger a wave of selling, you may want to initiate a short position at the same time. If you put in an order to sell 10 lots at 845, to continue using our example, you would take the loss on your 5 lot long, then create a 5 lot short position at 845. If the market then went to 775, as we expect, you will offset the 25 point loss on the original buy order with a 70 point gain on the short trade.

Have a good week.

Cheers,

Clive.

We are watching these markets very carefully right now as there is a confluence of events that suggest things may be changing. We don;t often start talking the funny-mentals, and we don’t often worry about relationships between markets, however close they may be. But I’m going to make an exception in this instance.

Price action in Oil is probably tantamount to the whole thing. Western economies are on the brink of recession, triggered by the Credit Crunch, but exacerbated by the soaring price of Oil. The Central Banks are meant to raise rates in response to rising inflation, but the current rise in inflation is nothing to do with people over-spending. Far from it. If Central Banks raise rates on this basis it will be disastrous.

We need Food and Energy prices to come down to take the inflationary pressure off.

So now we turn to our charts:

Just looking at the contracts we cover here at FuturesTechs we see the following:

Corn is well off it’s highs. We topped out at 799.2 in June. As I write this we’re trading 625. Pressure off.

Wheat’s all time high was set back in February. The recent high/failure was bang on a Fibonacci retracement level. So that’s going down as well.

Soybeans only topped out in early July and so far haven’t taken out any really big supports on the way back down, although price action in recent days has totally favoured the Bears.

Brent Crude Oil has dropped from a high of $147.50 on July 11th to 129.66 on Friday. We have posted a “Three Black Crows” Candlestick reversal pattern; a significant reversal. That was last Tuesday, Wednesday and Thursday (15th, 16th, 17th July). On Friday (18th July) and so far today (21st July) price action has favoured the Bears (Dolly could spoil the party, though).

So Ags are well off their highs and Oil has had a reaction lower that’s like nothing we’ve ever seen before. At the same time Bond prices are selling off hard (the “flight to quality” trade unwinding) and Equities are staging a recovery.

Most are calling this a “Dead Cat Bounce” (a rally in a Bear market that doesn’t last long!), but when you factor in everything else we’ve just highlighted you start to at least ponder this: Is the worst of the bad news over? Are we “all done” with this sell-off? One thing that favours this is the negativity of the popular press. You know things are about to turn when you can’t find a single bit of good news in the press, and I put the business pages down yesterday morning because it was putting me off my breakfast!!

We have had our web offering up and running for a few months now and we’ve been speaking with plenty of private traders of all different levels of experience. We have heard a few stories of people losing lots of money, and still not really feeling that they’re swimming above water.

Many of these people got signed up to training seminars that are advertised with lines like “make £50,000 a year for just 10 minutes work a day”. And there’s our first “tip”: Does that sound too good to be true? What do they say: “If it sounds too good to be true, it probably is!”. Come on! You’re intelligent people. Also if you see someone trading a “live” trading system, make sure it is live. And think about this: If I had a trading system that was whiz-bang nailed on money making and amazing, would I tell anyone about it?

Now consider this: There is a school of thought that 80% of traders who Spread Bet lose money. There is another school of thought that Spread Bet firms move the market to where your stop is and knock you out of trades. Are you sure? Most spread bet quotes are based on the underlying index. The spread bet firms’ highs and lows are matched to the underlying almost to the tick. So they’re not moving the market up and down to try and trigger your £2 stop. Please!

There are some very important disciplines you need to exercise before you start trading. Here are just a few that I can think of off the top of my head.

Start off small. Why give away all your money while you are learning to trade.

Understand and utilise Risk/Reward. Whenever you put a trade on make sure you’re aiming to make more money that you’re prepared to lose. If you always do this then you can lose as many time as you win, but you’ll still make money. If you try and make three times what you’re prepared to lose (known as a 3;1 Risk/Reward ratio) then you can have 7 losing trades out of 10 and STILL make money. Technical Analysis is the best tool for working out when you are putting on a trade with favourable Risk/Reward.

Never bat against a strong trend. Why do people feel the need to try and buy something that’s falling like a stone, or sell something because it’s really strong? This is one of the biggest mistakes new traders make. Don’t try and trade against a strong trend. We look for Candlestick patterns to suggest trend changes, then wait for confirmation. We saw a Hammer on the FTSE Futures chart last Wednesday, but it wasn’t until Friday that we started believing there was more upside to come. Even now we’re not getting too carried away, and have reasonable upside targets, because the Bears could wake up at any minute.

We are currently looking for the recent pullback in Oil to do a bit more. But we’ll soon change our minds if the positive candles start to appear, and the smart money will be made by getting long once this happens and riding it back to $147.

Find one thing to trade (at a time) and learn it’s personality. Different markets behave in different ways, and you may need to spend the early months discovering a market that suits you. You will all have different approaches to risk, volatility and the like. You will also have to skew the type of product you’re looking for towards how much time you can devote to it. I would suggest that something like the DAX Future or the S&P 500 would require a lot of attention, whereas something slightly less volatile may suit those who don’t have time to watch it’s every move. Yuo may need to try a few different things before you find something that appears to work for you.

Be well capitalised, and don’t risk it all on one trade. There is no point trying to turn £200 into £2000. You have a much better chance of turning £2000 into £20000. With £200 in your account you run a good chance of doing your dough in the first few trades. Many firms offer a dummy account or a “training account”. Good idea. Take advantage. Press buttons. Make mistakes. Then start risking your own money once you’ve got a few of these mistakes under your belt. Once you do start trading don’t risk all your capital on one trade. This isn’t the Casino where you get your pile of chips and stick it all on red because you fancy a Gin and Tonic. This is a business (well it could be if you take it seriously).

Manage your emotions. Trading can be an emotional business, and you need to make sure you can manage or control this, otherwise you will make decisions with your heart and not your head. Many professional traders spend lots of time making sure they’re in the right frame of mind to trade. A good way of doing this is by putting together a plan at the start of each day; collating your ideas. Then you have something to refer to. You can “keep it sensible” and not allow yourself to start making baseless emotionally-driven decisions.

This is just a few thoughts that may help you along the way. I’m sure future blog posts will expand on this theme as I think it’s extremely important.

I’ll sign off with one more thought, which kind of follows on from the previous point: Have a strategy. If you’re trading is based on “I bought it ‘cos I thought it was going up” then you shouldn’t be trading. Again this is where Technical Analysis can serve a trade so well. It gives then something to reference off in the decision making process. This is what Futurestechs does for many professional traders, and what we hope to become for many more of you; a useful reference point and a good building block towards a successful trading career.

We have had our new website available for around 1 month now and we are starting to gain momentum for our new “per end user” offering. Private Investors, CFD and Spread Bet traders are starting to sign up and see the value of our service.

In recent days we’ve seen some interesting moves in the markets:

Gold Futures have turned over and after a plethora of sell signals yesterday we went Bearish this morning, just before the market sold off sharply.

Brent Crude Oil Futures has seen a big sell off but we’re certain this is merely a buying opportunity.

We have remained Bearish in the short term on Equity markets but our patience is being tested on this, particularly in the DAX Future, never one to willingly play the game!!

Interestingly today’s early high/failure in the S&P 500 Futures could be key and suggests that the market can head lower in the short term.

Login for a free trial to see our thoughts on these movements in more detail.

So to a question we’ve been asked a few times of late: Where did we appear from?

We have been servicing professional traders for 8 years now. The company formed in March 2000, soon after the closure of the LIFFE Floor. The traders who congregated on the LIFFE Floor headed up to different offices around this time, and suddenly they needed an edge, they needed information. I always had a string of traders who used to come and have a chat about the charts when I was based on the Floor, and so it was a natural progression to turn this into a daily commentary. I started by sending out a daily report on Bunds and T-Notes, and it grew from there. We grew with the Industry. Proprietary trading accounts for a good percentage of the daily Volume on exchanges like LIFFE and Eurex.

We wanted to expand our horizons beyond this arena, though, so it was a choice of Banks and Hedge Funds or Private/Retail Customers. Which way to jump!? We have found over the years that “bean counters” at the Institutions can cause problems for services like us, because they see a lot of free technical analysis being provided by the large brokers vying for their business. “Why pay for something that you can get for nothing?” -they say.

So we came up with the idea of a Members website where the reports can be viewed securely, on a “per end user” basis, which allows us to significantly reduce the price without upsetting our existing professional clients who pay for a “Site Licence” and the ability to distribute the reports amongst their traders.

We encourage you to take advantage of the chance to utilise this professional trading tool in your daily trading routine.

We were cheered by last Thursday’s rally in Equity markets, where the technical charts gave breakaway signals on several markets. Since then many Equity markets have held key support levels and we continue to move higher.

We are now at levels not seen since January in markets like the DAX Futures (next target gap resistance at 7342.5), the FTSE 100 Futures (there’s an upside gap at 6337.5) and the S&P 500 Futures (with another gap at 1451.20 that we’re targeting).

In the meantime the “hot” story right now is Oil, which is making new all time highs almost by the day. Goldman Sachs came out with a target of $200 for a 6 month to 2 year view. This was the same chap that targeted $100 a few years back which was met with guffaws at the time. Say no more.

Technically there’s been very little in the way of sell signals in Oil in recent years. At FuturesTechs I think we’ve been Bullish more or less non-stop since $30!!

Our next short term target area for the ICE Brent Crude Oil contract is £123.37-65. We use Elliott Wave projections to come up with these targets.

Gold and Silver are getting close to giving fresh sell signals so we’re watching this situation closely.

Our sell trade in Soybean Futures hasn’t gone exactly to plan although we are yet to close above our stop level of 1305.

Hope you’re having a good week, and if you’re in the UK I hope you’re enjoying this bout of fine weather!!

Cheers,

Clive.