Sunday, July 25, 2010

CTS Spotlight for the week of July 23rd, 2010

Hello and welcome back to CRI's CTS Spotlight



07/23/10: Little new in currency land as the correction from the spring moves continues. The credit crisis has abated for the time being and prices here appear to be trying to find stable ground. One exception, the Australian dollar, has resumed its' upward march as Asian growth prospect appear to dwarf those of the other regions. Backing this notion up, both Copper and Crude Oil have registered new long entry points. Of note this week, Feeder Cattle prices have broke violently higher suggesting a 20 to 30% price increase may be in the not too distant future. Please refer to this weeks CTS blog entry for more on that and a possible OnlyDoubles trade idea.

Feeder Cattle: Should the above noted bullish flag pole formation play itself out, one ought to expect a test of the 1.30 area going forward.

Trading Strategies:
1. One could be long from the recent breakout (at or near 1.15, with a firm stop below the recent lows at or near 108). The risk would be $.07 (each point is $500US) or $3,500 US per contract. If prices did move to 130 (and you sold) it would represent a potential profit of $7,500 US per contract.

That is a little over 2:1 risk reward, not bad but I don't want to risk $2,800 (or more!) and I don't want to be subject to a margin call - so lets take a look at a different trade idea.

2. One could buy the January 2011 Feeder Cattle $118 Call option for about $750US (refer to options sheet below)


if I bought the January $118 call option at $1.50 and let it expire worthless then my total risk/loss is $750US (no margin call ever!). If prices do move to $1.30 then this option will have an intrinsic value of .12 or $6,000US. That is a whopping 700% return.....now that is my kind of investing!

Considering our time tested principle of risking no more than 5% of our stake on any one play, one has to have at least 15,000 US in your trading stake to consider to trade idea. If that is the case then I highly encourage everyone to take a serious look at the trade.

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, July 18, 2010

CTS Spotlight for the week of July 16th, 2010

Hello and welcome back to CRI's CTS Spotlight



07/16/10: The European currencies have rebounded from the steep losses seen just weeks ago. This has come on the heels of better fiscal numbers coming out of the 'PIGS' nations. This recovery however has come in the face of dramatically lowered global growth forecasts (out of the proverbial frying pan and into the fire). Confirming this notion; equities are moving lower while bond markets are moving higher. Adding validity, the industrial metals have rolled over. While Platinum has broken down, Copper, Palladium and Silver are looking a little toppy. As stated previously, governments around the world should be spending their way out of the slow down not pulling back. Unfortunately, they will only act appropriately when prices are crashing once again, won't we ever learn!

Platinum: The heavy industrial metals were the first to turn up way back in the fall of 2008. After a precipitous decline prices moved higher through 2009 and into the first half of 2010 in almost a perfect 50% retracement of the crash. Notice though, the internal strength of this market was starting to fail (RSI momentum divergance) as we moved into 2010. This was a warning that prices were not as strong as they would appear.

So if prices are indeed correcting, where is a logical target for us to consider going forward. Two numbers jump out to me:
1. A natural 50% retracement of the recent up move would bring prices back into the 1266 area.
2. A potential Head & Shoulders price patten also suggest prices want to come back down into the 1242 area.

This then will be my target window for platinum prices going forward. Unfortunaly, there are no options available for this commodity contract and as a result OnlyDoubles subscribers and (I myself) won't be participating in this trade....

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, July 4, 2010

CTS Spotlight for the week of July 02nd, 2010

Hello and welcome back to CRI's CTS Spotlight



070210: On the heals of further bond market strength and a growing belief that deflation is back in the mix; all but one (Germany being the lone holdout) of the equity index's have broken their respective up-trends, have registered new bearish chart patterns and/or have broken down in earnest. Fundamentally, the recovery wasn't all that great to begin with and now politicians are calling for tighter fiscal policy, the imposition of various new corporate and consumption tax regimes and a growing belief that various industries need to be more strictly regulated. Look out all you capitalists, its going to be a bumpy ride for a little while. Else ware, commodity prices look vulnerable too. While they haven't broken the way stocks have we may need to go through a period of consolidation before any new moves higher can be seen.

Stocks: Listed above are the four most significant stock index's in North America. The Dow Industrials, The S&P 500, The Nasdaq and The TSX 60 (important for us Canadian's....irrelevant to the rest of the world....lol). Notice the almost straight line up move we experienced over the past year. It is hard to believe the Dow was trading in the 6000's just last year! The important thing here (I believe) is that it would be perfectly normal and healthy for all of these markets to take six months and clean themselves up. Give us a 50% retracement, let's hear some real bearish sentiment out there, and if we could too please.....could we get a nice bullish momentum divergence while you are at it......maybe that is asking a little much....

For those OnlyDoubles subscribers out there, after some careful analysis, it appears an option trade just isn't profitable enough (from a risk/reward perspective) to consider. Should we get a rally up to test the respective stops, options positions may become attractive at that point...


That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com