Category Archives: Trade Ideas
A new week is coming, with new trades ahead.
We can see that American Indexes have set their all time high, S&P 500 is at 2122, Nasdaq 5048, DJI at 18272, very close to the resistance at 18288 reached on the 2nd March 2015. American Indexes have been going through a lateral consolidation since many days by now, and finding a trend in the mid-short term is very hard. I would recommend to stay in the range of prices, selling at maximums, and waiting for selloffs to enter in new long positions. All the fluctuations in merican equities will be driven by news from the real economy.
DAX, who is among the stock indexes who rallied the most after the announce of the QE on 22nd January 2015, reporting from December 2014 till the peak at 12374 on April 10th 2015, a 29% increase, found a support point in area 11250, a -9% from the peak, before remounting up till 11700 and settling at 11417 on friday. I personally took a long position on the DAX through a structured product called turbo certificate when the underlying was at 11270, made some trade and at the end I reported, in 4 days, a total gain of 60% of the position by selling the certificate at DAX 11620 (the certificate price went up from €3.85 to €6.15). In my opinon, in the very short term I see a potential for downwards. After the below expectation GDP results (I have to say that even if below expectations, a yearly growth of 1.3% is still remarkable in this particular moment in Europe, where Italy reported a yearly 0.0% growth), market makers and other players have started to sell positions on German Equities. The index plummeted also due to the turbulence on the bond Market, where 30Y Bund yield rocketed up to +27%, from 1.1% to 1.4%. Bill Gross, Janus Capital, said in previous days that he started to accumulate short positions on German Government bonds. Now, yields have started to lower again. Factors which will influence the fluctuations of the DAX will stem from the situation in Greece, which is now running out of liquidity. In the case of Grexit, i would run away from the markets. The exit of Greece from the Euro would be an horrific nightmare in all markets, Fixed Income, Currency, Equities… This event have an approximately 30% possibility (my personal estimation) of happening. Any uncertainty over the soundness of Greece cash reserve will create turbulence. 11000 is a good point for taking a long position on DAX. I would recommend taking a long position in that area. Macroeconomic data from US and China will also trigger some volatility. To sum up with, in the Long run German equities are BULLISH. Riding volatility, and finding the right entry point for a LONG position in DAX instruments ( I use certificates and warrants because I consider securitized derivatives more safe for mantaining adequate amount of capital and avoiding margin’s vicious circles) may lead to profit. $$
I attached two files showing the chart of the DAX and a personal technical analysis on the Dow Jones. Both charts have been created using R. If you like them I will post others.