Month: February 2011

By James McKee

Banking giants Allstate and Citigroup are entering a lawsuit in which Allstate is alleging wrongdoing by Citigroup with regard to its handling of mortgages. Allstate is attempting to recover nearly 2 billion dollars worth of securities that it claims were lost due to misleading data regarding mortgage debt purchases. Allstate alleges that Citigroup and its umbrella companies deceived them regarding the supposed stability of the mortgage debt in question. These securities were actually highly volatile time bombs, which Citigroup is believed to have been aware of in this case by the plaintiffs. While it stands to reason that any investment has some inherent risks misleading an investor can result in adverse consequences in some instances.

Citigroup is believed to have been all-too aware of the rate of default at which its loans were experiencing, despite this they promoted and sold this toxic debt to companies such as Allstate. Legal battles between titans such as Allstate and Citigroup do not bode well for the US economy and no matter what the ruling it will have an adverse affect on the USD. The number of lawsuits resulting from large companies deceiving one another has only risen in recent months leading many to question what the eventual consequences of these conflicts will be.

One has to beg the question on a matter of principle in business, if someone knowingly sells something “toxic” does that make them liable for the other party’s loss if there was no promise regarding the return on investment? While the numbers may have been misleading on Citigroup’s side of the equation one has to question what Allstate’s responsibility was in this situation with regard to analyzing their investment. Those on the forex currency exchange should pay careful attention to large lawsuits such as these because a ruling in either direction has a negative impact on the USD and the market at large.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.

By James Woolley

ETFs, short for exchange traded funds, are widely popular with both fund managers and individual traders. This is largely due to the fact that they can be bought and sold at any time, just like traditional stocks. However if you want to make consistent profits trading these instruments, then you have to get your timing right.

They say that timing is everything when investing in the stock market, and the same applies to exchange traded funds. These instruments tend to track a certain index or market. So this could include major indices such as the FTSE 100 and Dow Jones, major currency pairs such as the GBP/USD and EUR/USD pairs or commodities such as corn, crude oil, copper, gold, natural gas and wheat. The truth is that you can find an ETF for pretty much anything nowadays.

Anyway the point is that whatever you are interested in investing in, you have to buy at the most opportune moment. Therefore one option you have is to trade breakouts because a lot of the most popular markets are watched avidly by breakout traders, so any resulting price move can become self-fulfilling to a certain degree.

So for example if the price of crude oil happens to trade between $80 and $100 for months on end before finally breaking through the $100 barrier, then it might be worth buying the crude oil ETF. If the price continues heading higher to around the $120 mark, then you should make around 20% profit from your ETF investment.

An alternative approach is to wait for a market to be massively undervalued. For instance if the S&P 500 drops sharply over a period of several months and the RSI and stochastic indicators are now both below 20 and there is a clear MACD divergence pattern forming, then it may be worth drip feeding some money into an S&P 500 ETF for the long term.

To give you a few examples of how much money you can potentially make from exchange traded funds, let’s look back at 2008 and 2009. During this time you could have bought ETFs in the FTSE 100 when the price was around 3500 (now 6000+) and the Dow Jones when the price was around 6500 (now 12300+). Similarly you could have bought a crude oil ETF when the price per barrel was around $34 (now $93).

So the point I want to make is that ETFs provide you with plenty of opportunities to invest in a variety of different instruments whether it’s indices, currencies or commodities, for instance. However you still need to get your timing absolutely right otherwise you will struggle to make any money in the long run.

About the Author

Click here for a complete guide to long term investing and to read a full Portfolio Prophet review to learn about how you can successfully trade ETFs.

By Jared Levy, Editor, Smart Investing Daily, taipanpublishinggroup.com

This has been a turbulent week on the geopolitical front, triggering waves in the stock market and sending the price of crude oil through the roof. While the stock market corrects itself (as we anticipated), the price of crude oil seems to be creeping ever higher, putting upward pressure on the price of fuel and energy. Worse still is the serious effect this could have on the economic recovery that everyone has been banking on.

A couple of weeks ago I showed you a way you could partially hedge some of your fuel costs with the rise in crude oil prices. But higher gasoline prices at the pump are only part of the problem for most of us. A continued rise in crude oil will wreak havoc on the prices of many things that we need to live and work.

There are three questions I want to address today:

1. Are prices moving higher?
2. What the heck is the difference between Brent Crude and West Texas Crude?
3. How can you profit from a potential move in either?

Where Does Crude Oil Go From Here?

From a technical perspective, you have to be careful here if you are going long. The prices of West Texas Crude (and Brent crude) have almost gone parabolic. A “parabolic” move comes from the mathematical term “parabola,” which describes even curvature from a point called the apex.

For us non-math folks who are simply looking at price charts, a parabolic move means the asset (in this case the price of oil) is exploding higher, on increasing volume and in much bigger percentage moves than usual. This is extremely abnormal. Buying anything after its price has “gone parabolic” increases the risk of a sharp pullback in the near term.

The chart formation looks like a bit like a steep parabola; take a look at the shape of the arrow!

View Larger Chart

The price of crude oil recently jumped from $84 to $100 in about four days; it broke its recent resistance of $92 and exploded on huge volume. A $16 rally in four days is extreme. I know this by looking at the average trading range (ATR), which tells me what the typical movements are. The normal WEEKLY price moves in crude oil are less than $5 — a third of what we’ve seen in the past four days. Another factor is that volume is double its recent average.

As for the next move in oil, look for a pullback in the short term, maybe back to the $95 level (we saw a small reprieve yesterday), but with the long-term fundamental demand strong, geo-political unrest in the Middle East and the summer driving season upon us, bet on $120 oil in the next six to eight months.

(Investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Sara Nunnally simplify the stock market for you with our easy-to-understand investment articles.)

Brent Versus West Texas

Now, when we talk about oil, we’re mainly talking about West Texas Intermediate (WTI) oil. But there are other types out there, and there seems to be a great amount of confusion (and hype) concerning two specific types of oil: WTI and Brent crude. Let me try to clarify. Recently, Brent crude prices have been higher than WTI, but that is not always the case; there are many factors that can influence the price relationship between the two. Also keep in mind that that prices usually won’t get too far apart, because of the ability to ship oil from one place to another to take advantage of prices.

West Texas Crude (WTI for short)

In North America, WTI is traded on the NYMEX under the ticker “CL.” It is the most common measurement that we use HERE to track the price of crude oil. It is also considered “light, sweet crude” and is generally refined in and around the Americas. ALL the futures contracts for WTI oil are traded on the NYMEX and all are delivered and settled in Cushing, Okla. There are pipelines and storage tanks in and around Cushing that help distribute and store oil. When there is a glut in storage, prices generally go lower, when there is a big reduction in the amount of oil in storage, prices may go higher.

Brent Crude (Also called London Brent, Brent Blend, Brent petroleum and North Sea crude)

Brent crude blend prices actually account of two-thirds of the world’s oil supply. Most of Brent crude oil comes from the North Sea, hence the name. Brent crude is traded on the ICE (IntercontinentalExchange) and on the NYMEX (Ticker “LO”) as well. Brent oil fuels Europe and Asia and is delivered in several areas. Brent provides a pricing benchmark for most of Europe and Asia in the same way we use WTI.

Both WTI and Brent are priced in U.S. dollars

There are actually dozens of different types and blends of oil around the world. WTI and Brent prices are simply popular benchmarks for big oil companies and traders to use. Don’t get too caught up in the struggle between the two. Right now, because of Middle East tensions heating up and Canada’s oil sands sending supply to Cushing, Okla., the price of WTI is lower than Brent, but they are indeed highly correlated.

How Can You Profit?

The most efficient way to invest in the price of oil is to purchase futures contracts directly. Of course, there are things you need to know before doing so and you must have a futures account and understand the risks.

For those of you who are not ready to start your futures trading career just yet or can’t decide if you should buy Brent or WTI, I have a solution. There is an ETF that contains the “pick and shovel” oil companies. These are the guys that get the oil out of the ground and sell it to refiners. If the price of oil (Brent or WTI) is on the rise, these companies are usually following right along. It’s called the Oil Services HOLDRS (OIH:AMEX), and you can buy and sell it just like a stock with regular commissions.

Right now, the long-term prospects for oil look good and the Oil Services HOLDRS is a great alternative way for the average investor to participate. You can view the holdings and learn more here.

If I’m on target with my prediction for oil to hit $120 in the next six to eight months, I wouldn’t be surprised to see the Oil Services HOLDRS knocking on $200’s door. And for traders out there, the Oil Services HOLDRS does offer options.

Editor’s Note: This coming crisis could blow a 950% profit your way! The U.S. wants to use “green technology” to decrease our dependence on oil. But China has a 97% monopoly on a natural resource that is vital to green technology… and we’re about to experience a serious shortage! Learn which companies could solve this crisis and hand you 950% gains in as few as 24 months in this exclusive investment report.

About the Author

Jared Levy is Co-Editor of Smart Investing Daily, a free e-letter dedicated to guiding investors through the world of finance in order to make smart investing decisions. His passion is teaching the public how to successfully trade and invest while keeping risk low.

Jared has spent the past 15 years of his career in the finance and options industry, working as a retail money manager, a floor specialist for Fortune 1000 companies, and most recently a senior derivatives strategist. He was one of the Philadelphia Stock Exchange’s youngest-ever members to become a market maker on three major U.S. exchanges.

He has been featured in several industry publications and won an Emmy for his daily video “Trader Cast.” Jared serves as a CNBC Fast Money contributor and has appeared on Bloomberg, Fox Business, CNN Radio, Wall Street Journal radio and is regularly quoted by Reuters, The Wall Street Journal and Yahoo! Finance, among other publications.

The past 3 months weren’t particularly well for the Philippine Stock Exchange Composite Index despite all the positive hype that the Philippine economy has been getting as of late. The PCOMP or PSEi, being a leading barometer of the Philippine economy, has been telling a different story. As you can see from its chart above, the index has been steadily losing ground as it has been trading within a descending channel since it peaked at a high of 4,413.42 back in November 4, 2010. Since then it has already lost around 15.53% when it closed to 3,737.04 last Friday (February 25, 2011).

So the question that a lot people are asking is, “where will the index now?”

Well, I’m sorry to break the ice but in my technical point of view, the index and most of the listed stocks could face some more selling pressure in the days to come. You see, the index had already broken its primary uptrend (the one which could be traced back to to its bottom back in March 2009). Moreover, the last major support that should prevent it from falling further, which is its 200-day moving average, was also recently breached last week for the first time in almost two years! The index has now been trading below the said moving average for three straight days. Hence, if it does not rally past it in the next few days, then most likely it would head lower. Even it it does rally, a heavy resistance at the 4,000.00 level and the channel’s resistance could still weigh on the index. On the even bearish note, a move below last week’s low of 3,705.58 could send it down to 3,600.00.

Given the index’s present trend, which is downwards, and the uncertainty in the markets due to the political turmoil in the Middle East, I think it is prudent that we at least lighten up our long positions. At these times, it is better to stay away with our money intact for awhile and just re-enter the market again when everything has cleared already.

More on LaidTrades.com …

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that futures speculators trimmed their short positions of the US dollar against the other major currencies for a second straight week. Non-commercial futures positions, those taken by hedge funds and large speculators, were overall net short the US dollar by $23.2 billion against other major currencies as of the February 22nd data release. This is a decrease from a total short position of $23.2 billion on February 15th, according to the CFTC data and calculations by Reuters which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

This week’s data saw some notable changes with euro positions increasing to their highest level since October while Japanese yen positions have fallen to their lowest level since May 2010. Mexican peso long positions have risen for seven straight weeks and now sit at the highest net long position in over a year.

EuroFx: Currency speculators added to their net long positions for the euro against the U.S. dollar after declines the previous two weeks. Futures positions in the euro rose to a total of 45,598 long positions as of February 22nd following a total of 32,464 long positions on February 15th. This is the highest net long euro position since October 19th when euro positions were +46,748.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: Speculators decreased their net long British pound sterling bets following six straight weeks of gains. Sterling long positions declined to a total of 36,009 long positions after totaling 52,572 long positions as of February 15th.

JPY: The Japanese yen net contracts decreased for a second straight week as of February 22nd to the lowest level since May 2010. Yen positions fell to a total of 27,746 short contracts following a total of 18,548 net short contracts reported on February 15th.

CHF: Swiss franc long positions rose for a second consecutive week to a total of 12,291 long contracts, according to the COT data as of February 15th. Franc contracts totaled a net of 10,518 long contracts on February 8th.

CAD: The Canadian dollar positions retreated after advancing sharply higher the previous week to the highest level since March 2010. Canadian dollar long positions dipped to a total of 68,348 net long contracts on February 22nd after registering 72,090 net longs on February 15th.

AUD: The Australian dollar long positions were almost unchanged from the previous week. AUD contracts totaled a net amount of 66,064 long contracts as of February 22nd after AUD positions had totaled 65,514 net long contracts on February 15th.

NZD: New Zealand dollar futures positions headed lower for a second week to a total of 8,101 long positions as of February 22nd. NZD large speculator long positions had dipped the previous week to a total of 9,810 long contracts on February 15th.

MXN: Mexican peso long contracts continued to rise higher for a seventh consecutive week. Peso long positions increased to 114,276 net long positions as of February 22nd after totaling 109,096 longs the week prior on February 15th.

COT Data Summary as of February 22, 2011
Large Speculators Net Positions vs. the US Dollar

Euro: +45,598
British pound sterling: +36,009
Japanese yen: -27,746
Swiss franc: +12,291
Canadian dollar: +68,348
Australian dollar: +66,064
New Zealand dollar: +8,101
Mexican peso: +114,276

Further COT Resources from around the web:

• Forecast The FX Market With The COT Report

• The Only Indicator You Will Ever Need

By Taro Hideyoshi

Generally, traders need solid uptrends and downtrends to take profits from the market. However in non-trending or sideways market, swing traders, who short-term trade, present a lower risk opportunity.

Traders can use the reversal patterns; I have introduced you in previous articles, to trade in sideways. Using the patterns to plan to enter a trade and establish tight stop loss. Also use trailing stop when prices move up or move down in the same direction as your trade.

To trading using the reversal patterns in sideways market, first you have to define the ranges of traded price. Then you have to wait until the price traded around the boundary of that range. When the price traded near the boundary, keep monitoring it to spot any reversal patterns it might form.

For example, if you wish to participate on the long side in non-trending market, you should wait until the price traded around the lower boundary. While the price is trading near lower boundary, there is a chance that he price will form the reversal pattern. In this case you may seek for double bottom or reverse head-and-shoulder pattern.

If you spot the double bottom, go long as the price reverses from second low, as it rises over the high of the previous low day.

If you spot the reverse head-and-shoulder pattern, go long as the price complete the right shoulder, as it rises over the neckline resistance.

Do not forget to set your stop loss point. You may place the stop few ticks below the neckline since it works as support level after it has been broken. While you are defining stop loss and exit point, you will see your risk/reward ratio (as I discussed about this in one of my article). You risk/reward ratio should be at least 1:3 to be worth for you to enter the trade.

For going short, you can use the same rules as going long but reverse them.

When you are trading using reversal patterns, do not use them as standalone indicator. You have to put it together with other indicators. For example, if you anticipate going long, besides the double bottom or reverse head-and-shoulder, you should consider the indicator such as the relative strength index (RSI). If RSI makes a bullish divergence, it supports that the reversal is coming.

The risk is lower when all signals tell you the same. So, wait until all indicators are in gear in order to minimize your risk.

About the Author

Taro is an experience trader who trades in stocks, futures, forex. He strongly focuses on technical analysis, trading systems and money management.

If you would like to find more articles on MetaStock Tutorials, MetaStock Formulas, Trading Systems and Money Management. Please go to MetaStock Trading System.

By Cedric Welsch

If you want a way to make money without leaving your home you can start by trading currencies online. Online forex trading has become a good source of income for a lot of people. You can decide today to become one of these people. However, before you rush to go and sign up with the first online forex site, there are a couple of things you have to know. This is what will make you to succeed in trading currencies online.

Good, experienced and supportive help is very important for you to make it in trading currencies online. There are a lot of forex brokers online but you have to make a good choice. Forex brokers come in different types just like stock brokers. Register with a reputable forex broker that has an efficient site with very good support and service.

The next thing is for you to start doing a lot of learning. Knowing the in and out of trading currencies online will give you a good foundation to get to the top. There is a lot to learn. You have to be familiar with the language and systems of the business. The forex broker you choose should also have a lot of learning resources on its site for you o upgrade your knowledge in online currency trading.

Using a demo account is a good way to train yourself and test your hand before using real money. Your forex broker will definitely have a free demo account for you to use. Stay with the demo account for at least six months. After about six months, you can now start trading currencies with some money. Start with a little money and increase as you become better in trading.

Forex trading involves a lot of technicalities and understanding of currency movements. You also have to become familiar with the different currency pairs. This is where a lot of people fail and lose money. Taking your time to become familiar with the trading systems will really give you a boost in trading currencies online.

Emotional control is one other important thing with online currency trading. A trade is made at the click of a mouse. Emotions can make or break you in currency trading. Emotions can make you go against sound trading principles and make you lose a lot of money. Successful traders have learnt to have a grip on their emotions when making trading decisions.

About the Author

If you can be consistent with live forex news education, and even the forex broker reviews feeds, that should be key to trading success.

By Cedric Welsch

Currency trading experts are professionals in the field of foreign currency exchange who have learned the strategies and techniques in trading successfully. As a newbie, training and knowledge in forex (FX) are essential to gaining profit from trades. However, the trends in the currencies market are quite unpredictable and therefore provide a good chance for loss as well. Nevertheless, with proper guidance from experts, you will learn how to minimize your losses and maximize profit.

The foreign exchange market is considered the world’s biggest market. With over 2 trillion USD being traded each day, it dwarfs the stock exchange market many fold. Due to this fact, as well as its liquidity, it has attracted a large number of investors. However, keep in mind that although the chance of gaining huge profits is quite high, it also poses an equal risk to lose.

Currency trading is none other than the exchange of one specific currency for another. This situation is usually experienced by travelers who need to convert their country’s currency to the currency of the country they are visiting. It is quite noticeable that the exchange rates between two different currencies fluctuate often times. This is where the potential to gain profit comes into play.

In order to learn the basics of the trade, learn it either by yourself or with the guidance of currency trading experts. Although forex websites usually provide free materials on currency trading instructions and training courses, experts often provide a better approach to teaching the necessary skills. However, be sure that the expert has vast experience in the field and is completely willing to train or impart knowledge to you.

Becoming an apprentice of a successful forex trader is a good idea. Although some fancy themselves as experts, they may not have a good record when it comes to winning trades. The measure of one’s success is not seen by the number of trades won though, but by the ratio between money gained and money lost. Under the tutelage of a professional trader, you learn the trading in a more efficient manner than simply reading books or watching videos. However, written materials and videos are quite helpful as well.

Although it may take a while to become as good as currency trading experts are, patience and determination are vital attributes a learner must possess. With diligence and practice, you will soon become a successful trader like the masters.

About the Author

Any good investor must read forex news online regularly, just as you check forex trading reviews on a regular basis.

By James McKee

Continued conflict in the Middle East has resulted in price hikes on oil throughout and now the rest of the world must either pay or go without. Such a precarious position is one that Western countries will begin to feel the squeeze from financially very shortly. The USD and other western currency will suffer greatly if the cost of oil goes up because so to will the cost of all other goods. A rise in the price of goods corresponding with an ailing US dollar will result in a very decreased purchasing ability for US citizens as well as those in Europe and Asia.

Oil is used in everything from gasoline to toothpaste, petroleum products are used in every aspect of our daily lives and as a result we are implicitly dependent on them. This type of dependence results in a high premium being placed on oil and the ability to purchase it as affordably as possible. Already the world’s stock markets have fallen one percent overall as risk appetite is falling through the floor with most investors fearing further conflict in oil producing countries. This is driving the value of currencies such as the EUR through the floor since they have both domestic and international problems knocking on their door.

The conflicts currently occurring show little sign of slowing down until those involved are satisfied they have achieved their goals. Seeing that the problems in Middle East are rooted in inadequate food supplies and other infrastructural shortcomings this problem may continue for some time. Those on the forex currency exchange should keep an eye on the value of oil which is currently up to $94.00 a barrel, those who invested in oil futures are doing significantly well while the rest of us are waiting for the next tidal wave.

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.

By Cedric Welsch

Are you one of the millions of people today who are affected by the much reported global economic crisis in any way? If you are not really affected financially or in any physical manner, but somehow you worry for your future, then you should still count yourself to be one of them. Financial stability is surely a growing concern not just by some entire nations but also by individuals like you.

The good news is that there are effective solutions to counter this growing concern, and one of them is none other than the foreign exchange market. If you think you are slowly losing your sense of security on your current employment status or if you are afraid that there may be a chance of massive layoffs happening within the very company you are working for, then it might be time for you to think of a more stable means of filling in your financial needs. Any form of investment is surely a solution to secure your financial needs in the coming future. And no doubt, foreign exchange trading is one of the best forms of investment available today.

But what makes investing in the foreign exchange market such a rewarding career for any individual who decides to go for it? Well, the first benefit is the reward of convenience. You can trade in the forex market at the convenience of your own home. As long as you have a computer and internet access, trading can be done even in your pajamas.

You don’t have to be an already wealthy investor or businessman for you to be able to start investing in the trading business. Forex trading is a dream opportunity to many people who want to make profits out of the idea of putting their investments in. You can surely start small when investing in the forex market, yet could potentially end up becoming wealthy later on. Indeed this opportunity is for the wealthy, the semi rich, the not so rich, and even for the simple fellow. A better way to put it is that this opportunity is open to everyone who has the desire to become wealthy out of the idea of investing.

Now, this all may sound very enticing for you that you may want to jump in on the forex trading wagon immediately right this very moment. Well not too fast though. A big percentage of the people who decide to become traders actually lose money fast. But don’t get discouraged just yet. The reason why people are losing their investments is because they do not take the time to study and learn the entire business.

As long as you are committed to make profits out of your investments and are willing to put your mind and heart into the forex trading business, then this opportunity can indeed be the one you’ve been looking for.

About the Author

Only the reputable currency news sources must be listened to by traders. This is important in making forex analysis.