Another Alsi 40 trade and market run

What a great day on the JSE!!

(I have neglected to post for a week and I owe my apologies. I'm working on a personal mentorship programme for people interested in learning from the very basic investment level to advanced day trading involving futures and ALSI which will take place over three months. Drop me a line if you have some ideas on this!)

The stock market had run so hard over the last 10 days that it was time for it to take a breather. Tuesday and most of today constituted that breather in the short term.

Besides the short trade from this morning which I missed as I was attending to a large beekeeping goods order. I also run a full time beekeeping equipment supply business. While I was getting my weekly prescription of manual labour packing out the order of bee hives, beeswax and queen excluders I was not at my computer.

There was a grand 200 odd pts trading there for the taking this morning in the ALSI 40 short trade. Then the market started to move sideways for a couple of hours.

So, as I worked on my personal investing & trading mentorship programme, I kept a beady eye on the ALSI. I noticed a swing change and challenge of the 89e happened but failed. The moving average worked as support confirmed by the stochastic. Check 1 confirmed!

An hour or so later I look again and there it is! The signal to go long on the ALL Share Top 40! Around 14h30 it gave the signal with the best entry price being around 19300 but waiting for one more confirmation meant watching with baited breath until 19360 with a stop at 19330.

I went long after 15h20 and then added again about 15 min later. This price was around 19410. My target was 19535 which was a resistance level during the live chart yesterday. The SNP500 and Dow Futures were up stronger and our ALSI took off. It wasn't long and my take protif was hit... in fact it was less than 20 min and I was out of the trade.

The trade still went on to 19670 odd after that. This would've added an additional 100 odd pts to my total for the day but I ain't complaining! Besides by adding to the position as it went up I effectively doubled some of the points I did make due to the additional leverage I was using... In essence I got like an extra 80 pts when I added more contracts to the position.

Good trade nonetheless! And the market closed quite well considering its opening...

Financial, Trading Stocks & Investment Workshops, ebooks & financial freedom @ www.newsweek.co.za

ALSI Update and Trade

Mixed morning ALSI Session

It took a while and much discipline to wait for this morning's ALSI trade.After waiting 2 hours for a set up that gave me a signal on my strategy, it finally presented itself.

We went long at 10h35 at 16518 level and closed for almost 100 points as the ALSI went to the top level of our morning range. The range was sitting between 16500 and 16600 for quite a while. It took the positive opening of the FTSE as well as support from strong trading on the SNP and DOW as well to push our stock market to the upside.

Overall market outlook for today is that we may see a pullback again in DRD GOLD which would be mainly fuelled by the gap it left at 887c. In addition to this possible downside also consider that there is a double-top setting up at 950c with a neckline at 767c which gives us a 180c (estimated) target to the downside if the neckline is broken.

Once again, my recommendation in this instance is to keep track of gold and silver. One can refer especially to the New Gold ETF in order to analyse the chart for a view on gold's position.

Grindrod has defied all the stock markets odds and went positive from our call at 1126c last week we have seen it go to 1220c which is not far from our 106c target. In essence, this amount does warrant closing if you are edgy about the market today. Considering the move by the FTSE after it's open one may speculate that JSE will look to the upside. One would do well to consider that a sell on Grindrod today could be a fairly good move considering the overall market sentiment is in negative territory.

To give you an idea of the short term trade on GND last week this is how it reads:

• We call a long end of last week to enter at 1126c in the morning wih a stop loss level set at 1100c straight but utmost stop loss of 1080c due to the overall negativity of the market on Friday morning's open.
• Based on the price of the share we would calculate that we would trade with 30 contracts which gives us an exposure to 3000 shares for only 15% of the capital required, if you decided to trade the shares instead of using single stock futures to trade.
• So, if a contract price is R120 per 100 shares (there are 100 shares in each contract) I would have used only R3 600 plus brokerage in order to purchase 3000 x R11.26 = R33 780 worth of shares.
• I sell my Grindrod shares at R12.20 which gives me a gross profit of 94c which is the same as if you had bought the shares.
• We take the 3000 shares x 94c = R2 820 gross profit less brokerage of about R600 in total (estimated at higher end).
• I make R2 820 using R3 600 which is 78% return.
• As a share trader or someone using shares to trade on the short term you would have used R33 780 to make R2820 nett.
• That is equivalent to just over 8% using the full capital instead of leveraging your capital.

Moral of the story? Learn how to trade with your capital and make it stretch using leverage!

BUT IT'S RISKY!! Ask the right questions! If Grindrod went to 1100c and we both had to close the trade due to the stop loss kicking in, what would we have both lost?

1. In your example, the share lost 26c from 1126c to 1100c. Right? Take your 3000 shares x -26c = -R780 (loss) plus your transaction costs ie brokerage.
2. In my example, the futures contract lost 26c as well. Take my 3000 shares or 30 contracts x -26c = -R780 (loss) plus my transaction costs.
3. What's the difference? Not much! Right? Yes, I am!
4. Is there more risk in trading futures?
5. NOPE!

The risk only comes in when you overexpose yourself. If you are not aware of how leverage and margin works then you could get yourself into trouble. One should never, in general terms, leverage more than three times your portfolio size.

If your portfolio size if R50 000 you shouldn't leverage your trades to a value of more than R150 000. Effectively, you are controlling your leverage by keeping the margin you put on the table low.

You see, you could get leverage of 10 times on your account. This means that with R50 000 in your portfolio you could trade up to R500 000 worth of shares using a single stock futures. Don't go there...

Instead, come learn how to trade ALSI, Futures, Forex with us.

Financial & Investment Workshops, ebooks & financial freedom @ www.alsiapprentice.co.za

Anglo American & Alsi Update

Yesterday was eventful.

We had the US unemployent come out and it was pretty bad. Worse than expected. So our market and many others went for a bath...

We went long in the morning for 150 odd points which was amazing and our long position in Anglo American hit target and peaked out at 15100. We took profit at 14921c which is a round figure profit of R13 per share using single stock future contracts x 3. This means we had 3 contracts x 100 shares per contract. Brokerage is about R600 give or take depending on who you are trading with...

So our profit there is R13 x 300 less brokerage of R600 which gives us a total nett of R3900 - R600 = R3300. Not too shabby for a 2 day trade.

The ALSI gave up over 400 pts yesterday using the day trader trend indicator I was able to take the long, then a short as well as another long in the afternoon. The last long was at 16h25 at 16430 and out at 16685 for just over 200 pts. The volatility in the market can really benefit one if you are able to ascertain the trend intraday but also to gather swing points using various trading techniques.

We went long this morning with the resistance being 16454 end of day as well as 16450 intraday. As the market opened this moved to 16430 which is our top resistance. I closed at 16411. We opened at 16368 for 40 odd pts. Which pays for lunch.

Now the market is range bound stuck between 16420 and 16270 and could be traded within this range perhaps one more time. It does depend on the FTSE open. We may see a break of 16420/430 to the upside however the general end of day trend is bearish....

There is the opportunity that the market will swing depending on the FTSE open. This will signal a chase to close the gap at open. that gives us a target of 16470, followed by 16531, 16651/685 to the upside.

Watch DRD again and ANG as safe haven investors take refuge in the gold shares again...

Keep an eye on Grindrod as at 1100c it is quite oversold. 976c is ultimate support for the share with the next few weeks going forward we could see it head there to test it. However the short term over the next few days we could see a bounce with support at 1100c. A stop loss at 1100c would be more than sufficient for a reward of 106c per share to a max of 1311c from its current level of 1126c.

We broke 16450 and traded again going long keeping a ratchet stop loss at our resistance level now support at 16531.

Good trading.


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