Oil's not well

Exited my oil positions today - left it about 20 points too late, but c'est la vie. Charts show a bearish divergence - lets see what Thursday brings.

In the meantime, Gold is not encouraging, neither is the XJO. Guess, I'll check out the currencies, or else just wait it out.

On another note, finally was in a position to withdraw $1000 from my trading profits, and returned it to My Woman. After selling my oil positions today, I'm now in a position to withdraw another $1000. Never thought I'd see the day - just over a couple of months ago, I was down to nearly 40% of my capital, and very miserable.

Trading the first month of FY07-08

Not quite sure where equities are going just yet. I would prefer to trade a clear 100 point move, and since I'll probably get in 50 points from the bottom of the move, and exit 50 points from the top - that's a total move of 200 points that's needed. Right now the XJO is moving about in an 100 point range - not good enough for me.

Since the XJO takes direction from Wall Street, and since I don't trade overseas indices (not yet anyway), that means that the Street is undecided about where its going to go.

Have worked out a rough model of what I'm going to be looking for to see strength in the market:

1. A strengthening of the Dollar Index - for me this means a weaker USDJPY, signalling the return of the carry-trade; and lower bond yields signaling moderate inflation
2. That should usually be accompanied by a weakening in Gold prices, and a rebound in base metal prices.

The one market that I've been surest about this week is Crude Oil. Have several long positions, at an average of 7040 (WTI August 07). Hopefully, it gets to 7150, which is my immediate profit target. The weekly inventory report, due on Thursday, I feel will be bearish - with bigger builds in crude and gasoline, and better than expected refinery runs. Of course, I have no evidence to back this up, but I just feel its nearly time for Crude to correct to a mid-60s level. In any case, I intend to be long when the report comes out (if my target is not reached by then).

Time to buy Gold?

Stock markets are rebounding - despite that fact that bond yields are at 5.2%+/-. I suppose this is all very encouraging. However, the XJO bounced back off 6150 - and my guesstimate from the weekly chart was that it would drop to at least 6050. So I'm not sure this 'correction' is quite done yet.

What I have done, however, is buy 1 Spot Gold contract. Had figured a bottom of $644 at the trendline - it went down to $643.25. Of course, I didn't have an order in then. Went long finally at $648.25 (actually $646.75 + $1.5 IGM spread). Looking to go long Spot Silver @ $12.97.

My reasoning is thus: if there is a cartel selling Gold to suppress the price (as some suggest), they'd better have a lot of it to sell since India will come back to buy soon - Dussehra is just 3.5 months away - and that means weddings - lots and lots of them. With the economy booming that means a demand for lots and lots of jewelry.

Again: higher oil prices + higher food prices = inflation = higher gold prices.

Nymex Oil is a beast

When the June contract hit $66 last night, I was tempted to sell. However, I thought she might break through to $67 today - what with a storm in the Persian Gulf, Bush criticizing Putin etc. So, I bought 2 more contracts @ 6595 (actually 6283 - thanx IGM - that 12 point spread is a real beauty...not).

Anyhoo, got stopped out of both of them, as gasoline went south. So - went short @ 6529 (actually 6541 - again, thanx IGM... love your spreads) - got stopped out on that as well, as gasoline went north! In the meantime, I wanted to close my longs @ 6550 - but my computer got all slow on me. Finally, managed to get out of all 3 @ 6540.

All in all, got clobbered out of close to $1000 in all this mayhem - actual losses plus opportunity loss.

I think if this has taught me one thing, its not to trade frequently. Bide my time, pick my trades - and when I'm convinced - go in strong. At one point, I was up over $6000 - and in the end, came out $4500 ahead.

Well, I'll take my profits - hopefully, I'll remember this lesson.

Still here

Its been a while (again!) since my last post. A lot has happened since then - my grand design of getting back even on my positions got hit pretty hard in May. At one point, I was down to $3000 in capital, and with a MTM loss of another $1000.

But now, things are way different.

On May 8, I sent the following email to a friend in India:

interesting set-up in crude. if it holds $61 on the weekly chart, that would confirm the ascending wedge. following the chart pattern forward, we could be looking at $80 crude in jan 08...!! if the pattern is confirmed, now would probably be a great time to go long - we wont see this level for a very long time ......

My call on $61 being the bottom was right! And this was after crude had fallen for 8 straight days. I took positions @ $62 and $62.15, before I realised that crude is indeed a very volatile beast. 2 days later, I was fighting to save both positions, as a sell off in stocks spilled over into commodities, and sent oil tumbling back to $61.

I then realised something interesting about oil - it has an inherent tendency to seek a double bottom before moving on. Also, at the beginning of the trading period, the price would drop about 30-40 cents, find support and move back up till it found the next support.

So, I thought, this means - theoretically, I can sell at the closing price, buy back when it double-bottoms and get more bang for my buck! Great theory - in practice, the double-bottom never happened that day, after I'd sold my positions - because Gasoline prices rallied to all-time highs, taking crude along with it. Of course, that was a link I wasn't aware off - and so I missed out on the ride to $66.

However, this week gasoline prices came down again, due to refineries in the US firing up production. Crude followed - and this time I was ready. Oil was trading @ $63 (having bounced off $62.50 the previous day) before the the oil inventory numbers on Thursday; a decline in crude stocks sent to price up to $64 initially, however since there was a build up in gasoline stocks, i expected the market to fall. And it did - all the way down to $62.50 - which confirmed both my double-bottom expectation and my chart. I piled in with 3 mini contracts, and plan to hold on to them for a while. Last traded @ $64.85 - and they are the reason why my account has completely turned around.

Just 2 weeks ago, I was in despair - all my positions were going down the tubes (in fact, I'm MTM -$1000 on my share CFDs). Since then, I've had a couple of profitable trades on the XJO and some pretty amazing ones in crude futures. I feel like I've crossed a major step in my learning.

Bluechip Blues

Added AWB @ 355 today. Hopefully, this works out; even so, (I think) the charts indicate its time to breakout.

Here's the thing - both the bluechips I'm long in (BHP and NCM) have underperformed. In fact, NCM actually dropped - and I'm down $75 on it today; whereas I'm up $12 in BHP. AGK was a shocker as well - but I think she'll pull up tomorrow.

On the other hand, OXR, VBA and ZFX have done wonders, TLS wasn't too bad either.

I'm coming round to the view that I need to just trade companies that have a price of $5 or less - for starters, they don't gap at the open, and they're easier to chart.

I also think I need to trade fewer companies - I need to find just one good company at a time and increase my commitment to it. Currently, I don't buy more than $5000 worth of CFDs at a time. For example, if I'd just stuck with OXR last week instead of getting involved in the BHPs and NCMs of the world, my profits would have been bigger.

The reason I've spread my investment is to diversify my risk. I'm still not confident enough in my ability to read the stock movement. However, truth be told - I haven't done terribly badly. I picked OXR, TLS and VBA before they ran - and in the case of OXR, I managed to buy and sell at the good ends of the run. Besides, I think tracking 1 or 2 stocks is easier than tracking 9 or 10.

Update for today

Exited my OXR position @ 321. $330 profit - my biggest so far! Wanted to hold out to 323, but decided against it. In the end, it was a good move, since it closed @ 320.

Added VBA @ 264. Similar thinking to my AGK position: lower oil prices = good news for Richard.

Plus, methinx it may be breaking out.

Also, added MXG @ 462 - no fundamental reason other than because it broke out of its downtrend @ 451, and should retest its all-time high @ 501.

A Brand New Week

Missed out on the 4.3% drop in crude prices last nite. While I did think about shorting it @ 6634 levels, my experience with gold last week came to mind. I still need to recover $1000 to get back to parity. When I'm well ahead of that figure is when I'll get into the commodity futures markets next, and that too only on the long side.

Added LHG @ 329 and SMY @ 475 to my positions. LHG - since I believe Gold miners should recover soon; SMY (gapped open @ 470) since Nickel prices continue to rise and SMY managed to break through a key resistance @ 442. Target: 500.

Also bought AGK @ 1620. With oil prices coming down, that should provide an impetus on its uptrend towards 1700.

Closed out TLS @ 479 - profit of $150, so that nets out my earlier loss. Will look to re-enter TLS sometime, since she's going to 500.

Burnt!!

Got burnt in the jump in Gold. Up 1%, as soon as Iran announced the release of the prisoners. That's because it reacted to weaker US data instead.

As it turns out my stops were too wide, but they were still triggered - resulting in me losing 20% of my "playing" money.

I think a fundamental shift is afoot in the Gold market. Despite numerous columnists exhorting the cause for Gold, its prices and that of its miners languished in Q1 of this year - probably since the focus was on previous quarter earnings of other corporates. Now that the earnings season is over, the focus has shifted to the next quarter, and that probably doesn't look too good.

I was caught on the wrong foot due to hubris ("Gold will revert to $655")- the smart thing for me, in future Gold trades, is to remain on the long side. However, am wary at this point about the future moves in Gold - currently @ 673 lvls, and at the top end of the range for the last 2 months. However, have decided to go long on NCM, and have a buy order on LHG @ 329 to keep my battered hat in the ring (my OXR position is also booming along - up 8.68% in 2 days).

Last nite, I set premarket orders for ZFX (Buy @ 1508), BHP (Buy @ 3008), OXR (Buy @ 284).

Lesson #1:
Stocks in the ASX gap up. BHP jumped from y'day's close of 3006 to open at 3055. ZFX gapped from 1505 to open 1548. OXR gapped to open @ 288. Hence, you miss out on the major moves in the market - unless you are already in the market. BHP traded in a 3047-3061 range, ZFX in a 1519 to 1549 range.

Lesson #2:
A Buy Stop is different from a Buy Limit order. And the IGM system doesn't always give you that choice. I set my Buy orders as 'Buy Stop'- as a result, I got in at the first pricepoint of the morning. Which was certainly not what I wanted. I needed to have set a Buy Limit order - which does not execute my order unless my specified price is reached.

As a result, I've finished negative for the day in ZFX and barely ahead in BHP - and they're both virtually at my exit prices.

Lesson #3:
I need to get into (or out of) the market on the previous trading day. That's the only way I don't get burnt by the gap moves. Also explains why I did well on WPL today. I got in near the close yday.

So,I've written to IGM to put me on a Standard Account, from a Limited Risk Account - it hasn't worked for me, and I've just ended up paying lots of brokerage. They wrote back to say that I need to have $20K in the bank before I can move. Which, of course, I don't have.

Another go

Have shorted Crude @ 6488 (target 6300), Gold (Spot) @ 661.18 (target 655) and Gold (Forward) @ 667.35 (target 662).

Since I'm on 'Guaranteed' Stop-Loss with IGM, my entry price is net of their spread of $1/ contract.

Now, if the noises coming out of Tehran and London are anything to go by, I might just have a very "Good Friday" (and Wednesday and Thursday)..... :)

WPL

Shorted WPL @ 3923.I think the stock is probably long in the tooth at the moment. Oil should fall tonite, if Iran and UK make headway on the prisoners. Target 3665.

Reworking my exit strategies

Yesterday, I had the potential to make about $600 in profits. In the end I ended up with $90.

Gold fell early on in the piece - at one point, I was up $324 on my 2 mini contracts. Then, I failed to act in time, as the market turned sharply; and in the end I exited both positions with a $80 profit.

Then I went long the crude oil mini contract @ 6673; was up $324 again on this one. Thought - she's going to 6800; and she didn't. Had a stop at 6675 which got triggered as I slept - profit of $10.

While I continue to refine my conditions of entry, I seriously need to rethink my exit points as well. So far its been a bit of 'dartboard' and a bit of 'don't have a clue'.

Trading

Gold continues to jump about. Added another short @ 671.

Today's Conundrum... contd.

Exited my short TLS position @ 464; and went long at that level. Currently 467 - think I'll take profits @ 476 (if she gets there).

Today's Conundrum

Gold fell 1% last night - as usual, I was too late onto the move - finally mustered up the courage to go short at $666.70 (gold forward). For awhile, thing seemed to be going well, then she recovered- currently trading @ 667.

I think I'm going to sit this one out. The Yen is under pressure, and oil should lose some steam now that the Iran/UK sailor thing is in the UN. In a way, if the Iranians had nabbed American marines, we would be preparing for WW3 now. Its probably some overzealous Iranian Navy captain who started this - and now Iran has to back its own soldiers rather than give any ground even if they are in the wrong. In my mind: UN = not WW3 (yet) - so I still think Gold can go down to $655 (Spot) and $660 (Forward), assuming that the USD remains strong for a bit.

On to my position in TLS.

I entered the position thinking a double-top had formed, judging on the action in the morning. I was proved wrong in the afternoon. So I see no point in continuing with this position and should exit.

If I didn't have this position, I'd take the chart to be bullish (MACD uptrend, rising volume, has broken a resistance level), and would be thinking of buying today. So do I flip my position?

My first trade...

... was the Mini Gold Forward contract last night. Bought 1 contract @ $663.35, bailed out @ $663.05. So this was also my first loss.

In hindsight, I suppose it was greed that made me buy when the market had risen ridiculously quickly on the chart. I think the lesson here is only buy at a price that I've spent time reflecting on - and not get carried away by the drama in front of me. A bit more reflection, and a bit less 'seat of the pants' is called for.