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MongiIG

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  1. MongiIG
    Knowing how to control emotions while trading can prove to be the difference between success and failure. Your mental state has a significant impact on the decisions you make, particularly if you are new to trading, and keeping a calm demeanor is important for consistent trading. In this piece, we explore the importance of day trading psychology, for both beginner and more experienced traders, and give some pointers on how to trade without emotions.
    THE IMPORTANCE OF CONTROLLING EMOTIONS WHILE TRADING
    The importance of day trading emotional control cannot be overstated.
    Imagine you’ve just taken a trade ahead of Non-Farm Payrolls (NFP) with the expectation that if the reported number is higher than forecasts, you will see the price of EUR/USD increase quickly, enabling you to make a hefty short-term profit.
    NFP comes, and just as you had hoped, the number beats forecasts. But for some reason, price goes down!
    You think back to all the analysis you had done, all the reasons that EUR/USD should be going up – and the more you think, the further price falls.
    As you see the red stacking up on your losing position, emotions begin to take over – this is the ‘Fight or Flight’ instinct. This impulse can often prevent us from accomplishing our goals and, for traders, this issue can be very problematic, leading to knee-jerk reactions.
    Professional traders don’t want to take the chance that a rash decision will damage their account – they want to make sure that one knee-jerk reaction doesn’t ruin their entire career. It can take a lot of practice, and many trades, to learn how to minimize emotional trading.
     
    THE 3 MOST COMMON EMOTIONS TRADERS EXPERIENCE
    Some of the most common emotions traders experience include fear, nervousness, conviction, excitement, greed and overconfidence.
    Fear/Nervousness
    A common cause of fear is trading too big. Trading with improper size magnifies volatility unnecessarily and causes you to make mistakes you normally wouldn’t make if you weren’t under the stress of risking larger losses than normal.
    Another culprit for fear (or nervousness) is you are in the ‘wrong’ trade, meaning one that doesn’t fit your trading plan.
    Conviction/Excitement
    Conviction and excitement are key emotions you’ll want to feed off, and you should feel these in every trade you enter. Conviction is the final piece of any good trade, and if you don’t have a level of excitement or conviction then there is a good chance you are not in the ‘right’ trade for you.
    By ‘right’ we mean the correct trade according to your trading plan. Good trades can be losers just as bad trades can be winners. The idea is to keep yourself winning and losing on only good trades. Making sure you have conviction on a trade will help ensure this.
    Greed/Overconfidence
    If you find yourself only wanting to take trades that you deem as possible big winners, you could be getting greedy. Your greed may have been the result of doing well, but if you aren’t careful you may slip and end up in a drawdown.
    Always check that you are using proper trade mechanics (i.e. sticking to stops, targets, good risk/management, good trade set-ups). Sloppy trading as a result of overconfidence can end a strong run.
    Learn more about managing greed and fear while trading.
    DAILYFX ANALYST NICK CAWLEY ON LOSING DISCIPLINE

    Nick Cawley has more than 20 years’ experience in the markets and trades a variety of fixed-income products.
    "My worst trades - and there have been a few of them - have all been when my best laid plans are thrown out of the window when I lose discipline.
    ‘I didn’t use correct set-ups and stops; I thought I was ’better’ than the market; I doubled up when I was losing and lost more, and I put more money into my trading account to chase my losses.
    ‘I lost control of my emotions and traded when I should have looked without any emotion at my position and cut them and moved on. Easy to say, difficult to do, but a must for any trader who is looking for long-term success."
    HOW TO CONTROL EMOTIONS WHILE TRADING: TOP TIPS AND STRATEGIES
    Planning out your approach is key if you want to keep negative emotions out of your trading. The old adage ‘Failing to plan is planning to fail,’ can really hold true in financial markets.
    As traders, there isn’t just one way of being profitable. There are many strategies and approaches that can help traders accomplish their goals. But whatever is going to work for that person is often going to be a defined and systematic approach; rather than one based on ‘hunches.’
    Here are five ways to feel more in control of your emotions while trading.
    1. Create Personal Rules
    Setting your own rules to follow when you trade can help you control your emotions. Your rules might include setting risk/reward tolerance levels for entering and exiting trades, through profit targets and/or stop losses.
    2. Trade the Right Market Conditions
    Staying away from market conditions which aren’t ideal is also prudent. Not trading when you aren’t ‘feeling it’ is a good idea. Don’t look to the market to make you feel better; if you aren’t up to trading the simple solution may just be to step away.
    3. Lower Your Trade Size
    One of the easiest ways to decrease the emotional effect of your trades is to lower your trade size.
    Here’s an example. Imagine a trader opens an account with $10,000. Our trader first places a trade for a $10,000 lot on EUR/USD.
    As the trade moves at $1 a pip, the trader sees moderate fluctuations in the account. An amount of $320 was put up for margin, and our trader watches their usable margin of $9,680 fluctuate by $1 per pip.
    Now imagine that same trader places a trade for $300,000 in the same currency pair.
    Now our trader has to put up $9,600 for margin – leaving them with only $400 in usable margin – and now the trade is moving at $30 per pip.
    After the trade moves against our trader only 14 pips, the usable margin is exhausted, and the trade is closed automatically as a margin call.
    The trader is forced to take a loss; they don’t even have the chance of seeing price come back and pull the trade into profitable territory.
    In this case, the new trader has simply put themselves in a position in which the odds of success were simply not in their favor. Lowering the leverage can greatly help diminish the risk of such events happening in the future.
    4. Establish a Trading Plan and Trading Journal
    In terms of fundamental factors, planning for various outcomes in the runup to key news events may also be a strategy to bear in mind.
    The results between new traders using a trading plan, and those who don’t can be substantial. Compiling a trading plan is the first step to attack the emotions of trading, but unfortunately the trading plan will not completely obviate the effects of these emotions. Keeping forex trading journals may also be helpful.
    5. Relax!
    If you're relaxed and enjoy your trading, you will be better equipped to respond rationally in all market conditions.
     
    Jun 28, 2021 4:00 AM +02:00Ben Lobel, Markets Writer
  2. MongiIG
    INTRODUCTION TO MOVING AVERAGES:

    Moving Average – Talking Points:
    What is a moving average? How do you calculate moving average? What is the purpose of moving averages? How do you interpret moving averages? WHAT IS A MOVING AVERAGE?
    In technical analysis, the moving average is an indicator used to represent the average closing price of the market over a specified period of time. Traders often make use of moving averages as it can be a good indication of current market momentum.
    The two most commonly used moving averages are the simple moving average (SMA) and the exponential moving average (EMA). The difference between these moving averages is that the simple moving average does not give any weighting to the averages in the data set whereas the exponential moving average will give more weighting to current prices.

    HOW DO YOU CALCULATE MOVING AVERAGE?
    As explained above, the most common moving averages are the simple moving average (SMA) and the exponential moving average (EMA). Almost all charting packages will have a moving average as a technical indicator.
    The simple moving average is simply the average of all the data points in the series divided by the number of points.
    The challenge of the SMA is that all the data points will have equal weighting which may distort the true reflection of the current market’s trend.
    The EMA was developed to correct this problem as it will give more weighting to the most recent prices. This makes the EMA more sensitive to the current trends in the market and is useful when determining trend direction.
    The mathematic formula for each can be found below:
    Simple Moving Average:
    SMA =

    Where:
    A= Is each of the data points
    n = Number of time periods
    For example, looking at a 5-day SMA on a daily chart of EUR/USD and the closing prices over the 5 days are as follows:
    Day 1: 1.321
    Day 2: 1.301
    Day 3: 1.325
    Day 4: 1.327
    Day 5: 1.326
    SMA = (1.321 + 1.301 + 1.325 + 1.327 + 1.326)/5
    SMA = 6.6/5
    SMA = 1.32
    Exponential Moving Average:
    EMA =

    Where:
    EMAt= EMA today
    Vt= Value today
    EMAt = EMA today
    s =smoothing
    d = number of days
    Steps for calculating EMA:
    1. Calculate the SMA for the particular time period
    2. Calculate the multiplier for weighting the EMA using the formula:
    [2 ÷ (selected time period + 1)]. So, for a 10-day moving average, the multiplier would be [2/(10+1)]= 0.01818.
    3. Use the smoothing factor combined with the previous EMA to arrive at the current value.
    For example, looking at a 10-day EMA for a share, the table below displays how the EMA would be calculated:
      DATE
    PRICE
    10-DAY SMA
    SMOOTHING CONSTANT 2/(10 + 1)
    10-DAY EMA
    1
    24-Apr-18
    23.24
          2
    25-Apr-18
    22.99
          3
    26-Apr-18
    22.85
          4
    27-Apr-18
    23.00
          5
    28-Apr-18
    22.96
          6
    29-Apr-18
    22.21
          7
    30-Apr-18
    21.99
          8
    1-May-18
    22.43
          9
    2-May-18
    22.24
          10
    3-May-18
    22.55
    22.65
      22.65
    11
    4-May-18
    22.15
    22.54
    0.1818
    22.56
    12
    5-May-18
    22.39
    22.48
    0.1818
    22.53
    13
    6-May-18
    22.38
    22.43
    0.1818
    22.50
    14
    7-May-18
    22.61
    22.39
    0.1818
    22.52
    15
    8-May-18
    23.36
    22.43
    0.1818
    22.67
    16
    9-May-18
    24.05
    22.62
    0.1818
    22.92
    17
    10-May-18
    23.75
    22.79
    0.1818
    23.07
    18
    11-May-18
    23.83
    22.93
    0.1818
    23.21
    19
    12-May-18
    23.95
    23.10
    0.1818
    23.35
    20
    13-May-18
    23.63
    23.21
    0.1818
    23.40
     
    WHAT IS THE PURPOSE OF MOVING AVERAGES?
    The main purpose of the moving average is to eliminate short-term fluctuations in the market. Because moving averages represent an average closing price over a selected period of time, the moving average allows traders to identify the overall trend of the market in a simple way.
    Another benefit of the moving average is that it is a customizable indicator which means that the trader can select the time-frame that suits their trading objectives. Moving Averages are often used for market entries as well as determining possible support and resistance levels. The moving average often acts as a resistance level when the price is trading below the MA and it acts as a support level when the price is trading above the MA.
    HOW DO YOU INTERPRET MOVING AVERAGES?
    There are 3 ways in which trader’s use the moving average:
    To determine the direction of the trend To determine support and resistance levels Using multiple moving averages for long- and short-term market trends 1. To determine the direction of the trend:
    When prices are trending higher, the moving average will adjust by also moving higher to reflect the increasing prices. This could be interpreted as a bullish signal, where traders may prefer buying opportunities.
    The opposite would be true if the price was consistently trading below the moving average indicator, where traders would then prefer selling opportunities due to the market signaling a downward trend.
    2. The moving average for support and resistance levels:
    The moving average can be used to determine support and resistance levels once a trader has placed a trade.
    If the trader sees the moving average trending higher, they may enter the market on a retest of the moving average. Likewise, if the trader is already long in an uptrend market, then the moving average can be used as a stop loss level. The opposite is true for down trends.
    The charts below are examples of how the moving average can be used as a both a support and a resistance level.

    3.Making use of multiple moving averages
    It is common for traders to make use of multiple moving average indicators on a single chart, as depicted in the chart below. This allows traders to simultaneously assess the short and long-term trends in the market. As price crosses above or below these plotted levels on the graph it can be interpreted as either strength or weakness for a specific currency pair. This method of using more than one indicator can be extremely useful in trending markets and is similar to using the MACD oscillator.
    When making use of multiple moving averages, many traders will look to see when the lines will cross. This phenomenon is referred to as ‘The Golden Cross’ when a bullish pattern is formed and ‘The Death Cross’ when the pattern is bearish.
    A Golden cross is identified when the short-term moving average (such as the 50-day moving average) crosses above the long-term moving average (such as the 200-day moving average), while the Death cross represents the short-term moving average crossing below the long-term moving average. Traders that are long, should view a Death Cross as a time to consider closing the trade while those in short trades should view the Golden Cross as a signal to close out the trade.

    MOVING AVERAGE INDICATOR: A SUMMARY
    In summary, the Moving Average is a common indicator used by traders to determine trends in the market. Many traders use more than one Moving Average at a time as this gives a more holistic view of the market. Moving averages are often used to determine market entries as well as support and resistance levels.
    BECOME A BETTER TRADER WITH OUR TRADING TIPS
    Learn more about the moving average and other technical indicators Learn more about how to be a successful trader with the Traits of a successful trader training guide Get tips on how to create trading plan  
    Article by Tammy Da Costa, Markets Writer, 12th July 2021. DailyFX
  3. MongiIG
    S&P 500, GOLD, DOLLAR AND EURUSD TALKING POINTS
    Summer trading conditions are still steering the markets broadly with the likes of the S&P 500 carving out a very restrained tempo – though running an extended advance Thin markets can cap activity, but it can also exaggerate volatility significantly as with gold’s supposed Monday flash crash The Dollar is on the cusp of a technical break out (breakdown for EURUSD) and rate speculation has accelerated, but can it overcome the quiet?
    MARKET CONDITIONS RULE EVERYTHING AROUND ME, OR MCREAM
    The new trading week has opened to a range of assets experiencing very different conditions. There is the US Dollar whose charge through the end of this past week was on the verge of a major technical break that instead slowed its pace despite the additional fundamental support in exactly the right theme. Then we have gold which experienced an extreme intraday volatility that has been called a ‘flash crash’ by some and ‘fat finger’ by others. And the vast majority of the most liquid market benchmarks like the S&P 500 are trading at a tempo that is both boring traders and making investors dependent on capital gains anxious. All of this I believe is symptomatic of the same underlying issue: thinned market conditions. While technical and fundamentals matter, their effectiveness depends on general conditions of the financial system to convert or absorb meaningful developments.
    Chart of the S&P 500 SPY ETF with Volume, 100-Day SMA and Spot-SMA Disparity (Daily)
    Chart Created on Tradingview Platform
    As a reminder of the general market conditions we are facing, I will once again reference the average performance of the S&P 500 and its market elements. In the month of August, this baseline for ‘risk appetite’ has averaged out one of its lowest volume months of the calendar year – the lowest if you adjust for active trading days. Yet, on the flip side of the same coin, that shallow market backdrop tends to amplify short bouts of volatility. I like to use the analogy of a shockwave moving through a large body of water. When an earthquake occurs in the middle of an ocean, the impact is barely noticeable from the surface. However, as the wave moves towards the shallower areas closing in on land, it turns into a tsunami – a catastrophic but short-lived event.
    Chart of S&P 500 Seasonal Performance, Volume and VIX
    Chart Created by John Kicklighter with Data from Bloomberg
    We saw just how significant a drain in liquidity could distort a market this past session through gold. In the opening hours of trade during the Monday Asian session when market depth is perhaps its thinnest point of the week for a 24/5 market like this commodity, there was a sudden and dramatic tumble. In the span of less than 15 minutes, one of the most heavily traded assets in the world dropped more than 4 percent. There were some attributing the move to a technical break of 1760 which coincides with a meaningful trendline support / range floor combo while others suggested it was a delayed reaction to the charge in rate expectations in the US. Those factors could have helped get the ball rolling, but the intensity of the move almost certainly had to do with a large sell order not finding a market to absorb the offer. Yet, the thin liquidity cuts both ways such that a trend is an improbable scenario which the ‘buy the dip’ crowd would recognize readily enough. Until this spell is broken, the opportunistic range traders will continue to swoop in on these types of developments.
    Chart of Spot Gold with Daily ‘Tails’ (Daily)
    Chart Created on Tradingview Platform
    WHERE THE FUNDAMENTALS REALLY GAINED TRACTION: US MONETARY POLICY
    Last week, when I was off the desk, the Dollar started to make some serious progress. The real traction came on Friday specifically following the Bureau of Labor Statistics reporting of the July employment numbers. Nonfarm payrolls didn’t exactly blow expectations out of the water (they were a modest 75,000 or so above consensus), but the nearly 1 million additional jobs to the world’s largest economy was the biggest jump in overall employment since August of last year. In addition to the drop in the jobless rate and robust 0.4 percent increase in average hourly wages, there real heft in this run was the swell in monetary policy expectations. We furthered that anticipation this past session through Atlanta Fed President Bostic’s remarks whereby he suggested he supported a hike by the end of 2022 should the economy remain on its current trend. Further, he currently supports a taper starting in the October to December period but could be convinced of a September start should the data bare it out. While Bostic no doubt speaks for himself, it is clear that each FOMC member is also representing the central bank at large with guidance and messaging their most actively used tool. I find his remarks critical, but will the market?
    Chart of DXY Dollar Index Overlaid with Fed Implied Hikes Dec 2022 (Daily)
    Chart Created on Tradingview Platform
    Despite the fact that Bostic’s remarks further the fundamental implications of last week’s top data, the market showed limited enthusiasm for follow through to the point of a critical breakout for the Greenback. For the ICE’s Dollar Index, that would be a clearance through 93 while EURUSD would roughly translate the line in the sand around 1.1700. We are within easy reach of these critical levels and the fundamental nudging is there, but once again, such an attempt would contravene market conditions. I like both the technical barriers and believe the fundamental pressure to be legitimate, but my priority remains with market conditions. In this, the retail trader’s preference for range conditions, which is on full display in the IG Client Sentiment reading for EURUSD, may find the masses in the more probable path.
    Chart of EURUSD Overlaid with Retail FX Positioning from IG Clients (Daily)
    Chart Created on DailyFX.com
    THE FUNDAMENTAL POTENTIAL AHEAD
    While I do hold market conditions in higher regard than other analytical elements, there is inevitable change to aspect of the financial system just as any other. It is possible that the summer-bound masses can be brought back to the market by an overwhelming urge. I believe that the power of fear in risk aversion is the most universal influence, but the water mark on that front is very high. Short of that engulfing stimulus, we may find a little more sway in the collective sentiment data due over the next 24 hours from Australian and US business confidence to Japanese and Eurozone economic readings. That said, given the preexisting volatility of the Dollar, the scheduled speech from perhaps the Fed’s most dovish member, Chicago Fed President Evans, will draw my distinct interest for the currency, yields and many more financial outlets.
    Key Global Macro Economic Event Risk Calendar
    Calendar Created by John Kicklighter
     
    Written by John Kicklighter, Chief Strategist, 10 August 2021. DailyFX
    DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
    DISCLOSURES
  4. MongiIG
    Hang Seng Index is down close to 6.5% year-to-date. Does its recent bounce indicate a longer-term shift in sentiments?
    Source: Bloomberg   Indices Shares Valuation Hang Seng Index Technical analysis Stock  Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 26 August 2021. IG Hang Seng Index – What to expect
    The ongoing uncertainty surrounding Chinese equities continues to revolve around the increased regulatory risks weighing on its large domestic technology firms, which takes up more than 25% weightage of the Hang Seng Index. This includes clampdown on algorithms that restrict competition and increased supervision of data collection, which directly put a cap on companies’ profitability. With recent release of a five-year blueprint calling for greater regulation across key industries, one may expect more restructuring to come, with no quick resolution of the situation.
    Based on the daily southbound Hong Kong stock connect net turnover, there have been net inflows of around HKD2.6 billion over the past two trading days. Bottom-fishing sentiments have been fuelled by stellar corporate earnings drawing interest from some institutional investors, along with Tencent Holdings' share buyback. Although yesterday’s inflow was the highest in two weeks, overall fund flow for August still stands at a net outflow of HKD1.5 billion. Therefore, it awaits to be seen if the recent up-move indicates a longer-term shift in sentiments.
     
    Source: HKEX  
    Valuation
    As increased regulatory risks bring about uncertainty over forward earnings, a look at Hang Seng Index’s price-to-book (P/B) ratio suggests that valuation is currently trading close to two standard deviations below its five-year mean. This brings its valuation close to the Covid-19 sell-off back in early 2020, which is its lowest historical P/B ratio to date. However, with the uncertainty to future earnings from new regulations, profitability valuation metrics have been showing up conflicting signals, which will only be able to draw greater clarity over the longer term.
    Technical analysis
    On the daily chart, the index has seen a recent bounce off the 24,830 level, where a previous resistance level is now serving as support. This level may also draw some technical buyers from the Fibonacci 61.8% retracement level. With the Moving Average Convergence Divergence (MACD) indicator displaying higher lows, it suggests that downside momentum is weakening in the near term. That said, the index may find some resistance at 26,000, where a recent attempt to bounce off this level in early August was unsuccessful. This level also coincides with a downward trendline, which has been connecting lower highs since June. A retracement from this level may bring about a lower high, marking a continuation of its near-term downtrend.
     
    Source: IG Charts  
    A look at the monthly chart suggests that an ascending channel pattern has been in place. This points towards the 24,300 level potentially providing longer-term support, where the bottom trendline of the channel pattern has held up the index on previous four occasions. Longer-term resistance may be found at the psychological 30,000 level, where the index was weighed on previous two occasions.
     
    Source: IG Charts
  5. MongiIG
    EURGBP gains look likely to reverse as the reality of BoE vs ECB rate projections kick back in.
    Source: Bloomberg  Joshua Mahony | Senior Market Analyst, London | Publication date: Friday 12 November 2021 EUR/GBP has been on the rise over the course of the past week, with the Bank of England (BoE) decision to keep rates on hold dampening bullish sentiment for the pound.
    However, there is reason to believe this could be the beginning of a fresh bearish phase for the pair, bringing an opportune moment to look for shorts. While the BoE took a more cautious approach at the November meeting than many expected, they are still expected to be well ahead of the European Central Bank (ECB) when it comes to raising rates.
    The chart below highlights exactly that, with markets pricing in a strong chance that rates rise in December. A comparison between the BoE base rate and ECB deposit rate highlights the fact that markets are predicting a rapid ramp-up in UK rates compared with the eurozone.
    While predictions that the UK base rate will top 1% before the end of 2022 may be a little lofty, there is a wide acceptance within markets that the BoE looks set to act first. That widening differential between UK and eurozone rates does provide a potential carry trade benefit that favours those long the pound against the euro.
     
    Looking at the daily EUR/GBP chart, we can see that the recent rebound has taken us into the confluence of trendline, 200-SMA (simple moving average), and 76.4% Fibonacci resistance.
    This looks a prime moment for the pair to turn lower and continue the long-term downtrend.
    Source: ProRealTime  
    From a four-hour perspective, it all ties together as price turns lower from another intraday 76.4% Fibonacci level (0.8573).
    With price falling through channel and 0.8543 support, there is a good chance we start to see the bears come into prominence from here. There are no guarantees that this will play out as perfectly as it looks to be shaping up, but certainly things appear set up to bring a bearish turnaround for the pair.
    A break up through 0.8658 would serve to reverse the long-term downtrend that is the basis of this trade idea. However, for near-term a rise through 76.4% resistance at 0.8598 would also act as a key threshold that needs to hold for confidence in this turnaround to remain steadfast.
    Source: ProRealTime
  6. MongiIG

    Crude Oil Trading Strategies and Tips

    By MongiIG,


    Analyst piece
    Reviewed by Nick Cawley on December 14, 2021.
    CRUDE OIL TRADING STRATEGIES AND TIPS
    Crude oil is ranked among the most liquid commodities in the world, meaning high volumes and clear charts for oil trading. Oil traders should understand how supply and demand affects the price of oil. Both fundamental and technical analysis is useful for oil trading and allows traders to gain an edge over the market. Traders should follow a risk conscious crude oil trading strategy for greater consistency and efficiency. WHY TRADE CRUDE OIL AND HOW DOES CRUDE OIL TRADING WORK?
    Crude oil is the world economy’s primary energy source, making it a very popular commodity to trade. A naturally occurring fossil fuel, it can be refined into various products like gasoline (petrol), diesel, lubricants, wax and other petrochemicals. It is highly demanded, traded in volume, and extremely liquid. Oil trading therefore involves tight spreads, frequent chart patterns, and high volatility.
    Brent crude is the world’s benchmark for oil with almost two thirds of oil contracts traded being Brent oil. WTI is America’s benchmark oil, it is a slightly sweeter and lighter oil compared to Brent.
    CRUDE OIL TRADING HOURS
    WTI trades on CME Globex:
    Sunday - Friday, 6:00 p.m. - 5:00 p.m. (with an hour break from 5:00 p.m. to 6:00 p.m. each day)
    Brent trades on ICE:
    Sunday - Friday - 7:00 p.m. - 5:00 p.m.
    CRUDE OIL TRADING BASICS: UNDERSTANDING WHAT AFFECTS PRICE MOVEMENTS
    When trading oil, the two major focal points are, as with many commodities, supply and demand. Whether there was an economic report like a news event or press release or tensions in the Middle East, the two factors that will be taken into consideration is how supply and demand is affected, because this will affect the price.
    Supply Factors
    Outages or maintenance in key refineries around the globe, whether it’s the Forties pipeline in the North Sea or the Port Arthur refinery in Texas, must be monitored because of the effect it can have on the supply of oil. War in the Middle East leads to concerns about supply. For example, when the Libyan Civil war began in 2011, prices had seen a 25% rise from in the space of a couple of months. OPEC (Organization of the Petroleum Exporting Countries) production cuts or extensions lead to changes in the price of oil. For example, back in 2016 when the cartel had announced their decision to curb global supply by 1.9% (see chart below), the price of oil has risen from $44/bbl to as much as $80/bbl. {{GUIDE|OILTRADINGFUND }} WTI and Brent Crude price reaction to OPEC supply cut:

    Chart prepared by Warren Venketas, TradingView
    Oil Suppliers: Similarly, with understanding the importance of OPEC, it is also worth knowing who the top global oil suppliers are, and this information can be fond from the EIA website. Demand Factors
    Seasonality: Hot summers can lead to increased activity and higher oil consumption. Cold winters cause people to consume more oil products to heat their houses. Oil Consumers: The largest consumers of oil have typically been developed nations such as the U.S. and European countries. However, in recent times there has been a surge in oil consumption in Asian countries, namely China and Japan. As such, it is important for traders to pay attention to the level of demand from these nations, alongside their economic performance. Any slowdown could affect oil prices and demand may fall. Correlation to Global Growth: The chart below shows the largely positive correlation between the price of crude oil and global growth. The Chinese and US economies being the two largest in the world are a great barometer for global growth. The chart includes their respective major stock indices which move in line with crude oil prices – when the equity indices fall, the price of crude oil tends to fall and vice versa. WTI and Brent Crude positive correlation with FTSE China A50 and S&P 500 chart representation:

    Chart prepared by Warren Venketas, TradingView
    Alternative Energy: While fossil fuels such as oil and gas continue to dominate cleaner energy sources, there is an incessant push towards sustainability on a global scale. This will definitely impact crude oil prices going forward which makes this a key factor to monitor in a crude oil trading strategy. The impact of derivatives on the traditional valuations of crude oil have been thought by many to have destabilized the asset class. Simply put, the oil futures are thought to have reflected higher proportions of noise which do not reflect the fundamental data at the time. This is contentious within the investing community with some in disagreement with the above rationale, but it cannot be ignored that large speculative traders are becoming more influential with the flourishing derivative market.
    Want to know more about oil? Here are 8 Surprising Crude Oil Facts Every Trader Should Know!
    HOW TO TRADE OIL: TOP TIPS AND STRATEGIES
    Expert oil traders generally follow a strategy. They will understand the fundamental factors that affect the price of oil and use a trading strategy that suits their trading style. Each trading strategy is different, risk management is an important component to consistent trading, like the effective use of leverage and avoiding top trading mistakes.
    A comprehensive crude oil trading strategy could include:
    Fundamental Analysis Technical Analysis Risk Management Once a trader understands the fundamental supply and demand factors that affect the price of oil, he/she can look for entries into the market using technical analysis. Then, when a buy or sell signal has been identified using technical analysis, the trader can implement the proper risk management techniques. Let’s go through an example using the steps outlined above:
    Fundamental Analysis On the 30th of November 2017, OPEC and Russia agreed to extend an oil production cut, which lead to a decrease in supply. The basic theory of supply and demand suggests that a decrease in supply should be succeeded by an increase in demand and consequently price. This is the fundamental analysis a trader would need to incorporate into their strategy in order to identify potential buy signals in the market.
    WTI daily chart highlighting supply cut:

    Chart prepared by Warren Venketas, IG
    2. Technical Analysis
    The next step would be to analyze the chart using technical analysis. There are a variety of technical indicators and price patterns a trader can use to look for signals to enter the market. There is no need to use many technical indicators, one that you understand well will do the job. A common yet very effective way to begin analyzing any chart is to identify the overall trend of the market. In this example, the implementation of simple price action is used to identify higher highs and higher lows which is suggestive of a preceding upward trend. This falls in line with our fundamental expectation of further upward price movement.
    WTI daily chart showing preceding upward trend:

    Chart prepared by Warren Venketas, IG
    Once the bullish trend has been confirmed, the next step in the trading strategy would be to recognize possible entry points. Again, there are multiple tools and techniques to locate entry points but this example uses the Commodity Channel Index (CCI) indicator which moves into oversold terrirtoy shortly after the fundamental supply cut announcement was made. An oversold signal on the CCI advocates further price appreciation and the possibility of a long (buy) entry.
    WTI daily chart with CCI indicator:

    Chart prepared by Warren Venketas, IG
    3. Risk Management
    The final step in any trading strategy would be to employ sound risk management to every trade. At DailyFX we support the 1:2 risk-reward ratio guideline which basically means that the target level should be roughly two times more than the position stop-loss level. To manage risk, the trader could look to set a take-profit above the recent high and set a stop-loss at the recent low.
    In this example, a recent swing low ($49.30) has been identified as stop level which is approximately $8 away from the entry price ($57.20). There is no recent high which in this case which would allow for a target projection using basic maths. With the stop distance being roughly $8 away from entry, a 1:2 projection could seee initial resistance at the $73 level.
    WTI daily chart with 1:2 risk-reward ratio:

    Chart prepared by Warren Venketas, IG
    This sample trade would illustrate a positive risk to reward ratio. We researched millions of live trades in a variety of markets and discovered a positive risk to reward ratio was a key element to consistent trading. Additionally, at DailyFX, we recommend risking less than 5% of capital on all open trades.
      ADVANCED TIPS FOR OIL TRADING
    Advanced traders can incorporate additional information when setting up trades. Traders sometimes look at the futures curve to forecast future demand, CFTC speculative positioning to understand the current market dynamic and can use options to take advantage of forecasted high volatility moves or to hedge current positions.
    Futures Curve: The shape of the futures curve is important for commodity hedges and speculators. As such, when investors analyze the curve, they look for two things, whether the market is in contango or backwardation:
    Contango: This is a situation in which the futures price of a commodity is above the expected spot price, as investors are willing to pay more for a commodity at some point in the future than the actual expected price. This typically signals a bearish structure. Backwardation: This is a situation when the spot price is above the forward price for a commodity. This typically signals a bullish structure.
    CFTC/Speculative Positioning:
    The Commodity Future Trading Commission Report (CFTC) is important when trading crude oil futures. It provides traders with information related to market dynamics and therefore s can be a good way to gain a sense of where oil prices are heading. Movements in the CFTC managed money net positions typically precede the move in oil prices.
    Trading via futures and options
    Buying futures and options, a trader must use the appropriate exchange for the oil benchmark he/she wants to trade. Most exchanges have criteria for who is allowed trade on them, so the majority of futures speculation is undertaken by professionals.
    Oil Investing
    Instead of trading the individual market, a trader can get exposure to oil through shares of oil companies or through energy-based exchange traded funds (ETFs). The price of oil companies and ETFs are heavily influenced by the price of oil.
    Major Oil/Energy ETFs:
    Energy Select Sector SPDR (XLE) Vanguard Energy ETF (VDE) United States Energy Fund (USO) KEY REPORTS EVERY OIL TRADER SHOULD FOLLOW
    Weekly updates on the amount of crude oil inventories in the U.S. are very important pieces of data for oil traders – the release of which frequently leads to a bout of volatility. The inventory data is an important barometer for oil demand. For example, if weekly inventories are increasing, this would suggest that demand for oil is dropping, while a drop in inventories suggests that oil demand is outstripping supply.
    American Petroleum Institute (API): The API produces a weekly statistical report, which highlights the most important petroleum products that account for more than 80% of total refinery production, while crude oil inventories are also included. This data is typically released on Tuesday at 16:30ET/21:30 London time. Department of Energy (DoE/EIA): Much like the API report, the DoE report provides information on the supply of oil and the level of inventories of crude oil and refined products. This is announced on Wednesday at 10:30ET/15:30 London time. USING SOCIAL MEDIA TO TRADE CRUDE OIL
    Over the years, social media has become an increasingly useful platform to share ideas, pass on information and receive breaking news. This is the case for oil traders using #OOTT, which stands for the “Organization of Oil Traders” on Twitter. Here traders and industry leaders provide breaking news and key reports related to the oil market.
    Looking to trade in a simulated environment to better learn strategies, tactics and approach? Click here to request a free demo with IG group.
     
    By Warren Venketas, Analyst, 14th December 2021. DailyFX
  7. MongiIG
    The Bank of Japan is set to hold their monetary meeting across 16 – 17 December 2021, with the meeting bringing about a review of its Covid-19 business financing aid package.
    Source: Bloomberg   Forex Indices Bank of Japan COVID-19 pandemic Japan USD/JPY  Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 16 December 2021  BoJ meeting expected to keep policy tools unchanged
    No major surprises may be expected from the BoJ meeting this week, with current accommodative policies from the central bank set to remain. This includes keeping in place its target of -0.1% for short-term rates and 0% for the 10-year bond yield, under its policy of negative interest rate policy (NIRP) and yield curve control (YCC). With that, the ongoing divergence in monetary policies between Japan and its major counterparts may persist, largely due to Japan’s delayed economic recovery from Covid-19 and inflationary pressures posing less of a threat to policy tightening.
    Focus for this meeting may be on its Covid-19 aid program in light of the ongoing Omicron variant uncertainty, with expectations for a partial extension – a prolonged duration with more scaled-back form. The expiration is currently scheduled to be at the end of March 2022. That said, some expectations are also suggesting a wait-and-see approach from the BoJ, potentially choosing not to jump into a concrete decision until the next meeting in January 2022. Any forward-looking statement on the recent Omicron variant risks will also be scrutinised. That said, with Japan’s fully-vaccinated population of 77.6% (higher than the US of 59.6%), it seems likely that the eventual path may lean towards further economic reopening.
    Historically, the Nikkei tends to be positively correlated with the S&P 500, with 12-month correlation largely within the 0.5-0.8 region. However, the Covid-19 pandemic has induced a divergence between the two indices, with 12-month correlation falling deep into negative territory – a sight that appears out of the norm. The spread between the two indices is also trading at its highest level in 15 years. That may indicate some room for potential catch-up growth to play out in the coming year.
     
    Source: Nasdaq, Federal Reserve Bank of St. Louis Japan 225 on two-week high
    The Japan 225 has been largely trading within a rectangle pattern since the start of the year, with recent price movement forming a near-term higher high. A recent bullish moving average convergence divergence (MACD) crossover may suggest an attempt to move higher, although previous upward momentum was dampened by some global risk-off mood at the start of the month. Support may be at the 27,100 level, where the index was held up on previous four occasions. Resistance may be at the 29,500 level, where a downward trendline may weigh.
     
    Source: IG charts USD/JPY in rectangle pattern
    The movement for USD/JPY may continue to be driven by external factors, with a lesser extent coming from the upcoming BoJ meeting as seen from past instances. The currency pair has been largely trading within a rectangle pattern since October this year, with a flattening MACD suggesting some indecisions for its longer-term movement. Near term support may be at the 113.25 level, where the lower trendline of the rectangle pattern has provided some support for the pair previously. With the recent shift to some risk-on mood, the pair has come in at its two-week high, with resistance at the 114.65 level ahead.
     
    Source: IG charts
  8. MongiIG
    If seasonality is of any guide, we are potentially heading into a period of increased volatility. With key economic data in focus ahead, how will the S&P 500 play out this month?
    Source: Bloomberg   Indices Shares Federal Reserve S&P 500 Inflation S&P Global Ratings  Yeap Jun Rong | Market Strategist, Singapore | Publication date: Thursday 01 September 2022  What to expect this coming September?
    If seasonality is of any guide, we are potentially heading into a period of increased volatility, which traditionally saw a move higher in the VIX before tapering off towards the end of the year. The average 10-year historical performance of the S&P 500 generally saw May (+0.23%) and September (-0.35%) being the weaker months compared to the rest of the year. After a period of consolidation in mid-August this year, the VIX has bounced off its closely-watched 20 level, rejecting the notion of a perceived low-risk environment (VIX < 20). This suggests ongoing market stress, in light of heightened uncertainty and fear. With the recent sell-off, current market sentiments seem to trade more on the neutral level, with a clear moderation from previous overbought technical and market breadth conditions.
     
    Source: Refinitiv  
    Key economic data in September
    With the Federal Reserve (Fed) removing its forward guidance and taking on a data-dependent stance, more focus will be placed on the upcoming economic data to drive market expectations of upcoming policy moves. Several potential high-impact economic data in September to watch may include:
    1 September 2022, Thursday: ISM manufacturing PMI
    6 September 2022, Tuesday: ISM non-manufacturing PMI
    Prices paid by firms are expected to display a slower increase compared to the previous month, in order to support the peak-inflation narrative. With the prices-paid sub-index trending below expectations for four consecutive months since April this year, markets could be accustomed to seeing further moderation in pricing pressures. With that, any upside surprise could point to Fed’s tightening process being higher-for-longer. Further constraints on economic conditions such as new orders and production could be reflected as well, but the primary priority for the Fed seems more concentrated on taming inflation compared to supporting growth at current point in time.
     
    Source: Refinitiv  
    2 September 2022, Friday: US non-farm payrolls
    The US labour market has fully recovered all of its jobs lost due to Covid-19, which highlights greater need for job gains to fall back to more normalised levels of the 200,000 monthly range. That has not materialised thus far, with job numbers blowing past expectations over the past four months. Another blowout reading will likely fuel louder calls for more aggressive tightening from the Fed to tame the overheated labour market, providing another headwind for equity bulls to overcome.
     
    Source: Refinitiv  
    13 September 2022, Tuesday: CPI
    14 September 2022, Wednesday: US PPI
    The August readings for US headline inflation did provide some relief for markets after delivering its first downside surprise for the first time since March 2021, fuelling expectations that the worst is over in terms of pricing pressures. That said, a single data point does not make a trend. With markets having accustomed to the narrative that prices should continue to trend lower over the coming months, there are some pressure for inflation data to keep up with expectations. Current estimates are still pointing to an average of 7.5% for headline consumer price index (CPI) in quarter four (Q4) 2022, which could translate to the Fed maintaining its firm stance in taming inflation and we may have to see inflation readings around the low-5% range for some considerations of a dovish pivot. With the peaking-inflation narrative having been priced for now, further downside surprise in inflation data will be closely watched to push back against inflation being more persistent and hence, lesser pressure on Fed’s tightening.
     
    Source: Refinitiv  
    Key market risk event: US FOMC meeting (20 – 21 September)
    The upcoming month will bring the next long-awaited Federal Open Market Committee (FOMC) meeting, where the debate will continue to revolve around whether a 75 basis-point (bp) or a 50 bp hike is warranted. With the higher-for-longer stance for rates coming from various Fed members, the Fed Funds futures are currently placing its firm bet on a 75 bp increase with a 68.5% chance. A 75 bp hike may sound daunting, but if the Fed can provide indication of a subsequent rate slowdown, sell-off could potentially be short-lived. With talks surfacing of a higher-than-4% terminal rate, the fresh dot plot will be closely watched for any push-back as market expectations are still pricing for a 3.75% terminal range.
    Technical analysis – S&P 500
    After a failed retest of the 4,200 support level to end last week, the S&P 500 has crashed through its 100-day moving average (MA), with the series of lower highs and lower lows reinforcing an overall downward bias. The index has failed to defend its key psychological 4,000 level this week, which will now serve as resistance to overcome. Near-term support may be at the 3,915 level, but with the bears currently in control, any rebound from this level could leave the formation of a lower high on watch.
     
    Source: IG charts
  9. MongiIG
    The attempt for the S&P 500 to hold above an upward trendline yesterday proved to be short-lived, with the trendline break suggesting no sign of relief for risk sentiments.
    Source: Bloomberg   Indices Shares Commodities United States S&P 500 Petroleum  Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 16 September 2022  Market Recap
    The attempt for the S&P 500 to hold above an upward trendline proved to be short-lived, with the downward break of trendline support yesterday suggesting no sign of relief for risk sentiments and reinforces its ongoing downward bias. US Treasury yields continue to tick higher overnight in the lead-up to next week’s Federal Open Market Committee (FOMC) meeting, translating to greater bearish pressure on the rate-sensitive Nasdaq (-1.43%). The 17% plunge in Adobe’s share price added to the tech sell-off as well, after it released a mixed outlook for the fourth quarter while announcing its acquisition of Figma, which was deemed a too-high price tag by the markets.
     
    Source: IG charts  
    Economic data yesterday revealed a surprise rise in US retail sales (+0.3%) from a month ago and excluding gasoline, retail sales were up 0.8%. Along with the lower-than-expected readings for jobless claims, the resilience in US consumer demand and labour market provided the go-ahead for further tightening to take place. This comes despite some moderation for a 100 basis-point (bp) rate hike expectations in next week’s FOMC meeting (20% currently versus 25% a day ago), brought on by weaker manufacturing activity data and some hints of moderating inflation in prices paid by manufacturers. All eyes will be on the US consumer sentiment reading later today, where an outperformance may continue to support the overall Federal Reserve (Fed)’s tightening landscape. Current expectations are for a slight uptick to 60, from the previous 58.2.
    Asia Open
    Asian stocks look set for a negative open, with Nikkei -1.03%, ASX -0.68% and KOSPI -0.40% at the time of writing. Chinese equities remained under pressure yesterday, reacting negatively to the partial rollover of maturing medium-term policy loans which suggests that its growth problem is more than just an issue of liquidity. The Nasdaq Golden Dragon China Index remains down by 0.8% overnight, with the negative lead in Wall Street providing a downbeat environment for risk sentiments in the region today as well.
    Singapore’s August non-oil exports figure came in stronger-than-expected at 11.4% year-on-year (YoY) versus the 8.3% consensus. A 4.5% drop in electronics exports from a year ago was mitigated by a 16.9% rise in non-electronics exports, with the heavy-lifting done by pharmaceuticals, food preparations and structures of ships and boats. While this may point to some resilience, the cloudy outlook on global trade with further tightening of central banks’ policies, such as in US and EU, along with virus restrictions in China, could still put a cap on sentiments.
    A series of economic data out of China will also be in focus today. Though it may not be reflective of the impact from recent virus restrictions, it could still provide some clarity on underlying economic conditions. Overall data are likely to reinforce the lower-for-longer growth picture, with YoY industrial production’s growth unchanged from July, while fixed asset investment to see some moderation from ongoing property risks. The bright spot may be in retail sales with a 3.5% recovery from previous 2.7% as China eased inbound travelling rules, but that is unlikely to drive bullish sentiments with market focus on further moderation in September from renewed restrictions.
    The Hang Seng Index (HSI) is edging closer towards its March 2022 bottom, where talks of policy support have previously driven a 20% relief rally. The index continues to trade with an overall downward bias, with the series of lower highs and lower lows while multiple attempts to rebound are eventually proved short-lived. Any downward break of this level over the coming days may leave the 17,000 level on watch over the longer term.
     
    Source: IG charts  
    On the watchlist: USD/CAD at its highest level since November 2020, Brent crude below support
    The USD/CAD has tapped on a 3.6% plunge in oil prices overnight to push to its highest level since November 2020, with the trigger being headlines that the US Administration will not rush into buying crude to refill its Strategic Petroleum Reserve (SPR). The confluence of headwinds surrounding oil prices also include concerns of further moderation in demand outlook and an aversion of US rail workers strike in a tentative deal. After hovering at a key support-turned-resistance at the US$92.87 level, Brent crude prices failed to hold, with the lower highs in prices continuing to present an overall downward bias. That seemingly leaves the US$82.50 level on watch next.
     
    Source: IG charts  
    Thursday: DJIA -0.56%; S&P 500 -1.13%; Nasdaq -1.43%, DAX -0.55%, FTSE +0.07%
  10. MongiIG

    Daylight saving time ends

    By MongiIG,


    General
    Find out how your trading will be affected
    Dear IG Community,
     
    UK and European clocks will go back one hour when daylight saving time (DST) ends on Sunday 30 October 2022.

    Until Sunday 6 November 2022, the end of US DST, our opening hours will be affected.
    Markets and products affected by DST
    US and Canadian markets will open one hour earlier in UK time, so US and Canadian shares will be quoted between 1.30pm and 8pm Leveraged trading on US shares (all sessions) will run from 8am to midnight Monday to Thursday, and from 8am to 9pm on Friday 4 November Share dealing (non-leveraged) on US shares (all sessions) will run from 11am to 9.30pm Monday to Thursday, and from 11am to 9pm on Friday 4 November All forex markets will open at 9pm on Sunday 30 October and close at 9pm on Friday 4 November 24-hour dealing on indices will open at 10pm on Sunday 30 October and close at 9pm on Friday 4 November Expiring US markets will settle an hour earlier than usual New York Cocoa, Sugar and Coffee, and London Sugar all close an hour earlier than normal Weekend trading will open at the same time (8am Saturday). FX will close at the same time (8.40pm on Sunday), but Indices will close one hour earlier (9.40pm on Sunday) Overnight funding (tom next) adjustments for FX pairs will apply to positions held through 9pm All markets will close at 9pm on Friday 4th November (one hour earlier than the normal 10pm close).

    From Sunday 6 November, the above will revert to their usual hours
    Asian markets, which do not observe DST, will operate one hour earlier in UK time (until March 2023). For example:
    HKEX shares will close at 8am SGX shares will close at 9am South African equities will open at 7am and will close at 2.50pm (until March 2023).
    In-hours trading on Eurex futures (including the Germany 40) will be available one hour earlier at 12.10am.
    Digital 100s: pay attention to the expiry times of US and Asian digital 100s, as the proximity to expiry has a large bearing on the price quoted. You can check these in-platform via the 'information' section in the deal ticket. Digital 100s are only available to professional clients.
     
    Please let us know if you have any question.

    All the best - IG Community Team

  11. MongiIG
    What does the remainder of Q1 2023 have in store for US equity indices?
    Source: Bloomberg   Forex Indices Shares Stock market index United States S&P 500  Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 03 March 2023  Is now the right time to buy US equity indices?
    With the Dow Jones Industrial Average for the past week having traded in negative territory year-to-date as rising US yields pressured growth stocks, will other US indices follow suit or is now a good time to buy the dip?
    Over a week ago this column’s author warned of a decline in US equity indices which came to fruition with all US indices trading lower by the beginning of March.
    US equity indices year-to-date performance
    Source: Google Finance
    The recent minor sell-off in equity markets has been attributed to stronger than expected US Personal Consumption (PCE) data, the Fed’s preferred inflation measure, on top of a solid US labour market and, as a result of that, a far more hawkish US Federal Reserve (Fed).
    Despite US bond yields having surged to levels last seen in November 2022, with the US 10- year yield surpassing the psychological 4% barrier earlier this week, and market players expecting the fed fund rate pivot to now come in around 5.4% and no rate cuts to be seen before the beginning of 2024, US equity indices held up remarkable well as investors have been buying the dip.
    What is also interesting is that the inverse correlation between the US dollar and the S&P 500 has risen to multi-month highs, meaning that while the greenback has appreciated by over 4% from its early February low, US equity indices have slipped by a similar amount.
    Was February’s decline just a blip in this year’s uptrend?
    With the US dollar expected to continue to rise, equity indices are likely to slide further but when looking at fund manager flows, a lot of money may still enter the stock market from bond markets in equity consolidation phases as the one seen in February.
    The mid-February Bank of America (BofA) Global Fund Manager Survey showed that asset allocators cut their cash holdings and invested in emerging market stocks, especially in China, but that they were overall still broadly cautious, but less so than in recent months. In February just 24% predicted a recession compared to 77% who did in November.
    Where does that leave investors?
    When looking at a 20-year S&P 500 seasonality chart, the index tends to decline from mid-February to mid-March before rallying into the beginning of May.
    S&P 500 Index Seasonality Chart
    Source: EquityClock.com
    This has been the case in the past couple of years but since the chart refers to average performance it has to be taken with a pinch of salt.
    Technical analysis may be able to provide a clearer picture, at least in the short-term, though.
    Dow Jones Industrial Average
    The Dow Jones Industrial Average has been underperforming its peers since the beginning of the year and is the first major index to trade back in negative territory year-to-date but may soon be trading back in positive territory.
    The reason for this from a purely technical perspective is that the DOW formed a Doji candle stick pattern on Thursday, showing indecision, slightly below the December low but above the 38.2% Fibonacci retracement of the October-to December advance and the 200-day simple moving average (SMA) at 32,408 to 32,363.
    Since this was followed by a bullish candle on Friday, a bounce off this support area may unfold over the coming days and weeks which may take the index back towards its December-to-February highs at 34,334 to 34,712, provided that no bearish reversal takes the index below the 200-day SMA at 32,363 on a daily chart closing basis.
    If so, the June 2022 low at 29,649 would be targeted.
    Resistance can be seen along the early to mid-February lows and the 55-day simple moving average (SMA) at 33,527 to 33,602.
    More significant resistance is to be found at the 34,516 mid-February high.
    Only a bullish reversal above the 34,516 high on a daily chart closing basis would completely void the recent downward pressure.
    Dow Jones Industrial Average Daily Chart
    Source: Tradingview S&P 500
    The picture is quite similar with regards to the S&P 500 in that it is in the process of forming a bullish engulfing pattern on the daily candlestick chart, having for the second time in the past couple of weeks bounced off its 200-day SMA, marginally above the 38.2% Fibonacci retracement of the October-to-March advance at 3,926.
    Provided that the S&P 500 doesn’t drop below its mid-January low at 3,886 on a daily chart closing basis, a resumption of the October-to-March uptrend may well be underway with the December peak at 4,100 being targeted, ahead of the early February high at 4,195.
    S&P 500 Daily Chart
    Source: Tradingview
    Nasdaq 100
    Thursday’s bullish engulfing pattern on the daily candlestick chart, made around the 200-day SMA at 11,902, also points towards a recovery in the Nasdaq 100, provided that the recent descent doesn’t resume and take the index to below the 25 January low at 11,550 on a daily chart closing basis.
    If so, the odds would favour further downside with the October-to-January lows at 10,697 to 10,441 then being back in sight.
    Upside targets are the December peak at 12,166, followed by the February peak at 12,880.
    Nasdaq 100 Daily Chart
    Source: Tradingview Russell 2000
    The Russell 2000, which by mid-January was outperforming other US indices, including the Nasdaq 100, has also give back nearly half of its gains before levelling out this and last week.
    Provided that the index can remain above the 200-day SMA, 50% retracement of its October-to-February advance and the 19 January low at 1,827 to 1,825 on a daily chart closing basis, renewed upside seems to be in store with the February peak at 2,007 being back on the cards.
    Russell 2000 Daily Chart
    Source: Tradingview
  12. MongiIG
    Vodafone, BT, Verizon, and Comcast could constitute the four best telecoms stocks to watch.
    Source: Bloomberg   Shares Telecommunications Vodafone Comcast Verizon Communications BT Group  
     Charles Archer | Financial Writer, London | Publication date: Tuesday 25 July 2023  Telecommunications companies design, manufacture, and deliver the technology required to digitally interconnect the world. They offer phone, internet, and television services, and also build and maintain the infrastructure needed to support them.
    The sector has become increasingly attractive in 2023 to dividend investors, and also to those seeking safer harbours. Telecoms is widely regarded as a defensive sector as customer demand remains stable through recessionary periods — and it is becoming harder to predict whether the long-anticipated global recession will come to pass.
    On the other hand, even the largest telecoms companies are still growing and innovating. As part of the tech sector, disruptions including 5G, AI, the Internet of Things, cloud computing, cybersecurity, and blockchains are all growth areas that could see the best telecoms stocks continue to grow.
    Indeed, Meucci devised the first phone in 1849, while Bell won the first US patent in 1876. It took until 1991 for Berners-Lee to develop the World Wide Web, and today half of the world carries a smartphone containing the sum of all human knowledge in their pocket, able to contact anybody in the world at a second’s notice.
    But the growth isn’t over. The global telecom market rose from $2,642 billion in 2021 to $2,880 billion in 2022, at a CAGR of 9%. And telecoms are forecasted to reach $3,629 billion by 2026 — making the best telecoms stocks perhaps worthy of portfolio consideration.
    Top telecoms stocks to watch
    1. Vodafone
    Vodafone is a global telecoms operator with a footprint across 22 operating companies. In recent Q1 results, the FTSE 100 company saw group service revenue, which covers sales from contract payments, network use, and roaming, rise by 3.7% year-over-year to €9.1 billion. This increase was mostly due to price rises in the UK and increasing customer numbers, and it outperformed the average analyst estimate of 2.9%.
    However, Vodafone’s largest market of Germany saw service revenue fall for a fifth time in a row, this time falling by 1.3%. Further, price increases saw 120,000 broadband customers abandon the company, with new CEO and former CFO Margherita Della Valle noting ‘we have much still to do.’ For balance, its shares have fallen by 40% over the past year.
    However, Vodafone may see brighter days ahead. Performance in Spain and Italy has improved, and the group should benefit from restructuring that will see it shed 12% of its workforce, equivalent to 11,000 jobs.
    Beyond this, the company is planning a tie-up with Three to create the largest UK telecoms titan, though this is currently subject to a CMA investigation.
    2. BT
    BT is the another globally significant FTSE 100 telecoms stock. It plays a major role in the UK and Ireland, but also operates internationally across 180 countries. Its share price has fallen by 47% over the past five years, but a significant factor in this decline has been investment into infrastructure that is only just starting to pay off.
    BT has a significant competitive advantage in the UK, as it’s responsible for maintaining the Openreach network, the national broadband network that is used and paid for by almost every other broadband operator.
    The company is determined to expand this full-fibre network alongside its 5G rollout, aiming to create the ‘best converged network’ possible. After acquiring EE, the company now believes itself far ahead of the competition in this regard and has entered into a novel partnership with Ericsson to provide commercial 5G private networks across the UK.
    In recent H1 results, CEO Philip Jansen enthused that ‘we’ve grown both pro forma revenue and EBITDA for the first time in six years while navigating an extraordinary macro-economic backdrop...Openreach Board has reaffirmed its target to reach 25 million premises with FTTP by the end of 2026 and plans to further accelerate take-up on the network.’
    3. Verizon Communications
    Verizon is by far the largest wireless network carrier across the continental United States, and this scale brings significant gross margin power and hefty free cash flow. Indeed, its cash flow has steadily exceeded its dividend payments for years, leaving the company relatively stable — though it has suffered long-term share price decline alongside its international peers.
    Positively, Verizon is also slowly starting to pay off its debt mountain. And while it had it the past relied on its wireline business, it’s been selling off assets to build up enough cash to build up a wireless business of tomorrow. Indeed, capital spending is now almost entirely devoted to acquiring wireless spectrum licences, and it was the largest bidder in the 2021 C-Band spectrum auction in the US.
    In recent Q2 results, consolidated operating revenue declined by 3.5% year-over-year to $32.6 billion, driven by reduced wireless equipment revenue and lower postpaid phone upgrade activity as consumers tighten their belts. However, the company saw an eight consecutive quarter of Verizon Business phone net additions, adding another 125,000 to the total.
    Verizon, like BT and Vodafone, could be setting itself up for significant long-term growth.
    4. Comcast
    Comcast is the largest domestic internet service and pay-TV provider in the US, with the majority of its revenue derived from its cable communications sector. The S&P 500 company brings in hundreds of thousands of new internet subscribers every year, which typically sign up on high margin agreements. While there is increasing competition from wireless carriers, Comcast’s overwhelmingly dominant market share means it can continue to invest for the future.
    The company also owns NBC Universal, which has a substantial footprint in the US, and Sky, which is hugely influential across Europe. Comcast paid a whopping $39 billion for Sky after a bidding war in 2018, but the businesses are complementary and have helped its long-term performance.
    In recent full-year results, CEO Brian Roberts enthused that the company ‘achieved the highest levels of Revenue, Adjusted EBITDA and Adjusted EPS in our history and returned a record $17.7 billion of capital to shareholders.’
    Further he noted that Comcast ‘delivered impressive revenue growth in broadband; grew wireless lines by 1.3 million, our best result since launch; more than doubled our Peacock subscribers, surpassing 20 million at year-end; nearly tripled Peacock revenue to $2.1 billion; ranked second in worldwide box office; and generated record Adjusted EBITDA at our theme parks.’

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