Greg Secker – Global Market Update

• Features to look for:
  • Alltime highs and lows
  • General trends over long timeframes
  • Channels and trading ranges over long periods
  • Support and resistance over long periods
  • Relationship of current price to these features

Medium timeframe:

• Now you can home in on the medium-term and look for features specific to that timeframe
• Establish trendlines
• Establish major resistance
• Establish major support
• Look for larger scale chart patterns such as ascending and descending triangles, double tops and bottoms

Characteristics of Price action

• Now look at the price action itself and look for:
  • Volatility
  • Spiky daily price action
  • Price spikes
  • Gaps
  • Sideways
• In deciding on these price behaviours:
  • Look at the frequency of the events
  • Avoid stocks with wild or step-wise price action (they will probably have bigger spreads anyway
• For stocks that have wide daily ranges:
  • Use wider stops, but watch for adequate risk:reward
  • Possibly use limit orders to close your position at your target
  • If you trail stops give plenty of space
• Also look for:
  • DMA\’s and trend lines that have acted as support
  • Chart patterns that frequently appear and work favourably
  • Powerplays that have been winners off support and DMA
• You can learn a lot about your stock by looking back at the history and doing some analysis

• Trade the underlying commodity by trading the \’futures contract\’ for that commodity
• Trading the companies that are directly affected by changes in commodity prices

Trading Companies affected by commodity prices

• Prices – use the Bloomberg website: www.bloomberg.co.uk
• Charts – a good source for free commodity charts is the Future Source site: www.futuresource.com

Sectors

Which sectors may be affected by changes in commodity prices?

• Mining – general, gold, platinum, precious metals
• Oil and Gas producers – Integrated oil and gas, exploration and production
• Oil Equipment Services and Distribution
• Industrial Metals – Steel
• Gas, Water and Multiutilities – water, gas, gas distribution
• Electricity
• Automobiles and parts

Think about how each sector is affected by different commodities. Eg. high oil prices would be good for the Oil and Gas sector, but may have an adverse effect of the Automobiles and Parts sector.

Companies

Once we establish which sectors as a whole may be affected by changing commodity prices our next step is to see if we can identify any individual companies that may be affected more than others within the sector.

Where can we find information about a company\’s activities?

• The Selftrade website (formerly Squaregain) : www.selftrade.co.uk ( you will have to register with them on their website)
• Refer to specific company\’s website. Eg. Antofagasta\’s website is :www.antofagasta.co.uk

Example

Copper prices have been trading up near to record highs – how can we use this information?

The questions we should ask are :

1. Which sectors may this price rise affect?
2. Which companies within the affected sectors may be affected the most?

The mining sector will witness a flow on effect from these high copper prices. Specifically those companies whose core business is copper mining. So which of the mining co.\’s has a core business of copper?

• Using Selftrade we can establish that Antofagasta(ANTO) is a copper miner
• After more investigation we can see that it has 3 divisions

1. Copper mining
2. Transpor of freight via rail and road
3. Water distribution

• Further investigation reveals that ANTO\’s primary business is copper mining. It owns and operates 3 copper mines all located in Chile.
• Now we know that ANTO is a major copper producer we can compare the copper price and ANTO charts to see how it correlates.

How to use this information?

• This sort of information will help with your big picture trading
• The two charts are correlated meaning that the commodity prices will often act as a leading indicator to the price of the company
• Can offer good day-trading opportunities especially on days where commodity prices make the news headlines.