Month: March 2011

Good Morning. It’s Wednesday, March 30, 2011. At this hour, U.S. equity futures are higher. Overseas, the Asian markets advanced, while the European markets are up. Valeant Pharmaceuticals (VRX) announced that it made a proposal to the board of Cephalon (CEPH) to acquire the company for $73 per share in cash, or about $5.7B…Dean Foods (DF) to divest milk processing plant in settlement with DOJ…Total (TOT) announces the acquisition of a one-third interest in Blocks 1, 2 and 3A in Uganda held by a subsidiary of Tullow Oil, for $1.467B…Texas Instruments (TXN) says Japan factories on track for full recovery.

By Russell Glaser

In European trading today traders were moving into higher yielding assets such as equities and the euro while shunning the yen, the traditional safe-haven currency. ADP payrolls data will be released shortly and should dictate the trend for the remainder of the day.

The yen continues to weaken in trade versus the dollar and the euro as rate differentials are driving the yen lower. Rising European interest rates have been widely priced in and have fueled gains in the euro. But recent comments by Fed officials have opened the door for the possibility of a normalization of US monetary policy after more than two years of high liquidity. In response traders have been bidding the dollar higher this morning

Equities were stronger with the FTSE trading higher by 0.52% while the DAX was up over 1.60%.

At lunchtime during the European trading session the USD/JPY was up at 83.07 from 82.97. The EUR/JPY was at 117.11 from an opening day price of 116.92.

Morning data releases were positive as the KOF Economic Barometer showed positive sentiment in Switzerland which may be increasing expectations for a rate hike by the SNB Traders sent the Swiss franc higher versus the dollar as the USD/CHF traded lower at 0.9213.

British CBI Sales were significantly stronger than expected at 15 on forecasts of a decline of -1. This helped support the pound and the GBP/USD rose from a two month low to trade at 1.6025 from 1.5994.

Equities were stronger with the FTSE trading higher by 0.52% while the DAX was up over 1.60%.

ADP non-farm payrolls are expected at the opening of New York trading. A report that shows better than expected private payrolls may favor the short term trend of dollar strength and yen weakness. Resistance for the USD/JPY is found at 80.30 followed by 84.00 on an extension.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

At the beginning of the European trading session the dollar was on its back foot, but those losses were reversed following comments by St. Louis Fed President James Bullard. However, by the end of the trading day, the dollar had given back most of its gains for the day. The yen was sold across the board and looks to continue this trend. This afternoon, traders will be eying employment data from the US as the ADP Non-Farm Employment Change is set to be released today at 12:15 GMT.

Economic News

USD – Bullard Opens QE II Debate

To start the day, the dollar was sold broadly against the majors as the greenback was used once again for carry trades. However, the selling of the dollar ended following comments by St. Louis Fed President James Bullard. Bullard, who mentioned the Fed should begin discussing scaling back its $600B quantitative easing program sent the dollar soaring. Despite the fact that Bullard is not a voting member of the Federal Reserve Open Market Committee, the his comments are significant as they might open the door for further debate in the media, in turn, increasing dollar volatility.

At the end of the day, the EUR/USD traded near its opening day price of 1.4090. The British pound also finished unchanged at 1.5994. The Canadian dollar was bullish throughout the session and closed near its daily low at 0.9735. The dollar was significantly stronger versus the yen and the Swiss franc. The USD/CHF rose closed just off its high at 0.9233, the pair’s highest level since mid-March.

This afternoon, traders will be eying employment data from the US as the ADP Non-Farm Employment Change is set to be released today at 12:15 GMT. Expectations are for an increase of 205K new jobs. Last month the report showed the US economy added 217K new private sector jobs. The correlation between the ADP report and Friday’s jobs report is not proven, but some analysts still like to take cues from today’s report. While the US labor picture is improving, it will take Friday’s non-farm payrolls report to begin influencing the Fed to consider rolling back QE II earlier than expected.

Today’s support for the EUR/USD comes in at 1.4050, 1.4020, and 1.3860. Resistance is found at 1.4150, 1.4220, and 1.4250.

EUR – Euro Moves Higher Versus Yen and Franc

Expectations for rising interest rates in the euro zone have traders bidding the euro higher versus the yen and the Swiss franc. Yesterday the 17-nation currency put in a solid performance versus the majors with the lone exception being the US dollar as the EUR/USD traded with high volatility but ended the day near its opening day price.

Traders have put the European debt crisis on the back burner and have been focusing primarily on yield differentials between Europe and the rest of the developed economies. Yesterday S&P downgraded Greece’s debt rating, sending the bailed out nation further into junk bond status. S&P noted that last week’s agreement for the European Stability Mechanism increases the likelihood of a debt restructuring by Greece.

As the news hit the wires, the euro barely budged from its positions and went higher shortly after. This sends a signal to traders; as the currency fails to react to negative news; underlying fundamentals have changed. Expectations run considerably high for an interest rate increase at the next ECB meeting on April 7th. As such, traders have offered consistent bids for the euro.

Yesterday the euro made significant technical gains versus the Swiss franc and the yen. Against the franc, the EUR/CHF moved higher as the pair closed at 1.3011. The close is above its downward sloping trend line off of the October and February highs. Rising moment signals the pair could move higher with the next resistance levels for the pair falling at the March high of 1.3040, followed by the 200-day moving average at 1.3075. A move above this level will test the February high at 1.3200.

JPY – Yen Pulls Back Sharply

The yen continued is move lower versus the majors, booking sharp declines in particular versus the euro, US dollar, and Swiss franc. In the background of yen trading is the unresolved radiation leak at a Japanese nuclear plant that was damaged in the earthquake.

The USD/JPY pushed higher following St. Louis Fed President Bullard’s dollar positive comments and continued its appreciation into this morning’s trading. The pair closed on its high at 83.00 and has moved above its 200-day moving average. The next resistance level is found at the March high at 83.30, a level that coincides with the trend line off of the September 2010 and this February’s high. A breach above this level would target 84.00.

The EUR/JPY broke sharply higher, rising as high as 117.00 in early morning trade. The pair looks to continue to move higher on both fundamentals and technicals. Rising interest rates in the euro zone and a continued loose monetary policy in Japan should support the pair. On the charts, a lack of resistance barriers stands in the pair’s way. Initial resistance come is at the March 2010 low at 119.60. Support is found at the early March high at 116.00.

OIL – Middle East Turmoil Continues to Add Risk Premium

Crude oil prices yesterday rebounded to around $105.50 a barrel on continuing uncertainty in the North Africa and Middle East.

Unrest in Bahrain, Yemen, and Syria has raised further worries about world oil supplies. Those countries don’t produce much oil, but they are important transport links. Yemen sits on a strategic shipping lane that handles about 4 million barrels of oil a day.

Supply threats lifted markets, while demand uncertainty helped trim the high prices. The nuclear crisis in the quake-hit Japan, debt crisis in Europe and declining consumer confidence in US made investors not optimistic about the oil demand outlook.

Today, in addition to any developing news out of the Middle East, traders should also pay attention to the US Crude Oil Inventories report as it tends to have a large impact on crude oil’s prices recently, especially for the short-term.

Technical News

EUR/USD

Virtually all technical indicators on the 8-hour and daily charts are showing this pair trading in neutral territory. Traders may want to take a wait and see approach for the moment, as a clearer picture is likely to present itself as the day progresses.

GBP/USD

Both the Relative Strength Index and Williams Percent Range on the 8-hour chart indicate that the pair is in oversold territory. Traders can take this as a sign that the pair may see an upward correction in trading today.

USD/JPY

The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the 8-hour chart’s Stochastic Slow signals that a bearish reversal is imminent. Going short with tight stops might be a wise choice.

USD/CHF

A bearish cross on the 8-daily chart’s Stochastic Slow indicates that the pair is in overbought territory and may see a downward correction in trading today. In addition, the Williams Percent Range on the 8-hour chart is hovering in the overbought region. Going short may be the preferred strategy today.

The Wild Card

EUR/JPY

The Relative Strength Index on the 8-hour chart has just crossed over into the overbought zone, indicating the pair could see downward movement today. Furthermore, the 4-hour chart’s Slow Stochastic has just formed a bearish cross. Forex traders now have an opportunity to open up long positions and catch this trend at the beginning.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Telephone giant Philippine Long Distance Company (PLDT) or TEL in the Philippine Stock Exchange made news today when it soared by an amazing 15.72%, carrying the entire PSEi on its back.  

Yes. PLDT made quite a splash as it soared from PHP 2,036.00 per share yesterday to a closing of PHP 2,356.00 today. As you can see from its chart above, the move is actually exhibited by wide bullish breakaway gap. With its value turnover reaching a little more than PHP 2.25 billion, it is quite likely TEL will still have some gas on its tank to move higher as many of the shares were bought near its present price levels. Notice also that the MACD histogram has just turned positive, giving a buy signal. Moreover, the RSI is still not in the overbought area, suggesting that it could still move up. Technically, however, there are some resistances at the PHP 2,400.00 and PHP 2,500.00 price levels plus at its 200-day moving average. But its recent breakaway gap, which is supported by heavy volume, could set it up for a nice ride north above those levels.

On the fundamental side, PLDT disclosed that it will purchase 51.55% of Digital Telecommunications Philippines or DGTL, which is the operator of Sun Cellular from the latter’s parent company JG Summit Holdings, Inc. (JGS). The total purchase price will amount to PHP 74.1 billion which will then be funded through PLDT’s issuance of new common shares that will be priced at PHP 2,500.00 per share. With this in mind, PLDT’s outstanding shares could be driven by the market to match or even exceed the said issuance price, leaving TEL’s shares with some more upside from its present level.

More on LaidTrades.com …

Troubles in the international market, particularly in the Middle East and Japan, have been weighing heavily on the Philippine equities market. Hence, you might ask when is it best to jump back in especially at these times of uncertainties. 

The Philippine Stock Exchange Composite Index or PSEi has been trading within a descending channel since November last you. After peaking at 4,413.42 back in November 5, 2010, the index had steadily fallen to a low of 3,705.18 on February 28 this year. Notice from the chart above that the only support that has been keeping the entire phisix afloat was its 200-day moving average. With the index still respecting this major long-term support, the general view for the market remains upbeat despite the sell-offs that we have been seeing here and there. However, selling pressure should still be expected given its 5-month down trend.

Recently, the index has rebounded fairly following last week’s flat trading. Note, though, that there are key resistances ahead that are needed to be taken out before it could resume its uptrend. Ultimately, it needs to clear the resistance of the descending channel which coincides with this month’s high at 3,959.94 and the 4,000.00 psychological price level to do so.

So to answer the question of when is it best for one to buy back in the market, from a technical analysis point of view, I would say that it is safer to enter when the PSEi moves above 4,000.00 but that’s just me.

More on LaidTrades.com …

For those who weren’t able to make it to the Absolute Traders event “BULL pa ba or BEAR na ba???” last Friday, here are the stock picks I presented just to keep you posted.

Before anything else, LaidTrades want to congratulate Absolute Traders for organizing the event, the speakers who presented their outlook in the financial markets and everyone who joined. Cheers to the very helpful insights, great food and awesome people!

Anyway, let’s begin with my technical analysis on the 7 Philippine stocks I chose. Let’s do this alphabetically…

DMCI Holdings Inc. (DMC)

I’ve heard many people say that DMC stocks are too expensive at the current level. That may be true but I somehow disagree with it as far as my technical perspective is concerned. As you can see, its 1-year uptrend is well intact and as long as the stocks move this way, I’d stay bullish on this. However, if the uptrend breaks then that’s a different story. On the side note, there could actually be a possible cup and handle pattern forming and a break above the neckline could move the stocks to the PHP48.00 price mark. I got that target by adding the cup’s height to the possible breakout point. However, it’s just the cup we’re seeing right now and no signs of the handle yet. In that case, I’d stay on my toes and wait for the handle before making a trading decision.

Energy Development Corporation (EDC)

I already had an analysis on EDC before it broke out from the symmetrical triangle pattern (kindly check this). For last Friday night’s event, I just had to point out that the current price could be a strategic entry if you’re the type of trader who likes going for the “return move strategy”. Well basically, one way of applying this is by buying at the resistance-turned-support from stocks that broke out. In EDC’s case, it broke out from a symmetrical triangle and went back down just sitting right at the resistance-turned-support of the triangle. EDC closed last Friday’s trading session with a white candle and this could be a good buy signal. In case I’d enter around PHP6.00-6.10, I’ll place my stop loss below PHP5.95.

Manila Electric Company (MER)

Meralco last Friday broke out from a 2-month double bottom formation with its 8.2% gain as if the 0.25 interest hike in the Central Bank of the Philippines never occurred. The higlight for this stock pick is the possible large cup and handle pattern forming. We can clearly see the cup but we’re still waiting for the handle to be made. If the stocks break above the possible cup and handle’s neckline, I’m seeing PHP420.00 as the target price. In case I’d enter now, my stop loss is placed below the 4-month uptrend.

Metro Pacific Investments Corporation (MPI)

MPI could be consolidating to a cup and handle pattern as well. However, before it gets confirmed, we need to see this break above the neckline of the said pattern. In case it does, a PHP6.5 target price is achievable. If I am to enter now, my stop loss is placed below the 1-year support.

NiHao Mineral Resources International, Inc. (NI)

I included NI on the list as the current price could be a strategic entry. If you notice, NI is right at the support of the 1-year trading range. If you’re the type of trader who likes buying on supports or bounces then this could be a good one for you. In case I’d enter this, I’ll place my stop loss below the support of the trading range because if the stocks go below it, that’s more likely a breakdown and I don’t want to be riding that so I might as well just cut right away.

Philex Mining Corporation (PX)

PX hasn’t been hitting the spotlight recently as it’s just moving sideways. But in the process, it could be consolidating for huge upside. There could be a 7-month symmetrical triangle forming that could serve as the handle of a 1-year cup and handle looking pattern. A breakout from the triangle’s resistance could propel PX to my target price of PHP19 but if you’re looking at the cup and handle, a break above its neckline could shoot the price up to the PHP24.00 target price if you’d ask me.

TKC Steel Corporation (T)

TKC Steel Corporation is the publicly listed company I’m really watching out for. After its initial public offering (IPO) last 2007, the stocks slid then moved sideways for 3 years to which could be big symmetrical triangle, triple bottom, inverted head and shoulders or whatever pattern you may want it to be. The main concern here is, if the 3-year resistance breaks, then we can see a huge upside. If we add the height of the consolidation’s base to the possible breakout point, I’m seeing the PHP8.00 price mark as the target. At the same time, its volume has been picking for the past 4 months and the stocks have been trying to breach the PHP4.50 resistance of a possible triangle setup. If that hurdle breaks then the march towards the PHP8.00 target will follow up next.

More on LaidTrades.com …

USDCHF may be forming a cycle top at 0.9233 on 4-hour chart. Key support is now at 0.9139, a breakdown below this level will confirm the cycle top, then another fall towards 0.8922 previous low could be seen. Immediate resistance is at 1.9233, only break above this level could indicate that the uptrend from 0.8922 has resumed, then next target would be at 0.9300-0.9350 area.

Forex Signals

U.S. home prices declined in January, falling to a level equal with the summer of 2003, according to the S&P Case-Shiller indexes. The index showed prices fell 1% in the month, after rising 2.38% in December. The current downtrend began in August 2010, after the federal homebuyer tax credit expired in the spring. The housing market has continued to show major weakness well after other parts of the economy have shown significant rebound. David Blitzer, chairman of S&P’s index committee said, “These data confirm what we have seen with recent housing starts and sales reports, The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing.” From December, Washington D.C. was the only of the 20-city that saw an increase in prices. 11 Cities sank to new lows from their 2006 and 2007 peaks, including New York, Chicago, Atlanta, and Seattle.

By Dan Eduard

Following the recent bullish session the euro saw against the Swedish krona, it now appears that the pair has reached its peak and may turn downward. Technical indicators are showing that a prolonged bearish correction is likely to occur, giving forex traders a great opportunity to open up sell positions at a great entry price.

We will be looking at the daily chart for EUR/SEK, provided by Forexyard. The technical indicators being examined are the Relative Strength Index, Stochastic Slow and Williams Percent Range.

1. The Relative Strength Index has already breached overbought territory and has turned downward. Traders can take this as a sign that there is a good chance that the pair is likely to move south.

2. The Stochastic Slow has formed a bearish cross right on the upper resistance line. This is a clear indication that the pair could see a downward correction in the very near future.

3. Finally, the Williams Percent Range has also broken into overbought territory and is pointing down. This lends further evidence to our initial claim that the pair is likely to turn bearish soon.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Standard and Poor’s Ratings Services cut Portugal’s sovereign credit rating to BBB- from BBB on Tuesday, leaving it just one level above junk status. The downgrade came just four days after the agency lowered the European nation’s rating to BBB from A-. The Rating Service removed the country from CreditWatch with negative implications, but the outlook for the rating is still negative, the S&P said. The agency also cut Greece’s rating to BB- from BB+, and that country remains on CreditWatch with negative implications. S&P cited last weeks’ EU summit, which confirmed expectations that sovereign debt restructuring may be a potential prerequisite for borrowing from the European Stability Mechanism, which is set to replace the EU’s existing emergency rescue fund in 2013.