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IB Traders' Insight

Global market commentary from IBG traders and market participants.

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2015-03-05 04:33:17

Posted by
Stephen Alley
IB Asia Trade Desk
Contributor

Stocks

Nikkei trades higher as pharmaceutical stocks outperform

SGX Nikkei futures opened +50 at 18,705 after yesterday's 170-point Nikkei drop and with US stocks bouncing off their intra-day lows overnight. The Yen was almost unchanged overnight with USD.JPY trading at 119.7. Nikkei futures briefly dropped to a day-low of 18,650 early in the morning session, but recovered over the day to close near the day-highs. OSE Nikkei futures settled +110 at 18,760 (+0.6%). At the close, the Yen had weakened 0.2% with USD.JPY trading at 119.9.

Pharmaceutical stocks were among the Nikkei's top performers. Eisai (4523) closed +7.2% after it announced that it would collaborate with Merck to hold Phase 1 trials for combined cancer regimens using the two companies' anti-cancer drugs. Takeda (4502) also closed +2.0%, while DaiIchi Sankyo (4568) closed +2.4%.

2015-03-05 01:50:20

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor

Technical Analysis

WTI Crude (CL) Continues Rallying on Bearish Inventories

CL sold off initially yesterday on the much higher than expected inventory figures, and like last week, rebounded off of bearish figures, surging to 52.  CL is now in the middle of a sideways channel (on the daily chart) and significantly, breaking above a downchannel resistance line (on the weekly chart).  Weekly, daily and 4hr RSI, Stochastics and MACD are mostly rallying.

 

WTI Crude (CME CL Apr15) Weekly/Daily/4hr/Hourly

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-03-05 01:50:16

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor

Technical Analysis

VIX (VX) Testing Downchannel Resistance on Daily Chart

The VX is forming a weekly Doji, and is trying to break above a downchannel resistance line on the daily chart.  The 4hr chart's downchannel resistance line was broken yesterday, only to see a retracement back under the same resistance line, setting the stage for a potential higher low being formed today followed by a retest of the resistance line.  Although the daily MACD green line is flattening, the weekly MACD green line remains steeply sloping down.

 

VIX (CFE VX Mar15) Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-03-05 01:50:11

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor

Technical Analysis

Natural Gas (NG) Rallies Ahead of Storage Figures

NG marched higher yesterday ahead of today's storage figures, before being rebuffed at the 2.8 horizontal resistance level (as seen on the 4hr chart).  Although on the weekly and daily charts, NG appears to be trying to form a higher low, the weekly chart's descending wedge suggests a bit more downside before the wedge reaches its apex.  Encouragingly for bulls, weekly, daily and 4hr RSI, Stochastics and MACD are mostly rallying.

 

Natural Gas (CME NG Apr15) Weekly/Daily/4hr/Hourly

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-03-04 14:42:36

Posted by
Barron's

Contributor

Options

Traders Bet Japanese Stocks Will Zoom Higher

Central bank intervention, strong U.S. dollar, and pension fund buying all help to power the rally.

 

Japanese equities are becoming a favorite momentum play for international investors.

As the Nikkei 225 index trades around 15-year highs, investors are speculating the rally will continue. This is significant. Historic highs usually prompt investors to buy puts to hedge profits, or position for a market fall.

But Japanese equity trading patterns, at least those in U.S. market, are bullish. Trading is reminiscent of how investors once treated China when it seemed higher highs were always up ahead, and the government’s mastery of the markets and economy was unshakeable.

But now China’s economy seems shaky, and the government is trying to jumpstart growth. China’s central bank just recently lowered key interest rates by 25 basis points – one quarter of a percentage point – just four months after a previous rate cut.

Meanwhile, Japan’s economy is strengthening, and the stock market, which provides a look at investor expectations, is also benefiting from heavy institutional buying. Japanese pension funds, as noted here in November, are increasingly buying Japanese equities.

In the U.S. market, where many investors trade the world with exchange-traded funds and indexes, investors are aggressively buying upside calls on the iShares MSCI Japan (ticker: EWJ).

Last week, investors bought about 80,000 January 2016 $13 calls for 40 cents each with the fund trading around $12.35. Other investors bought about 70,000 April $12.50 calls that expire April 2. Both trades increase in value if EWJ rallies above the call strike prices.

Bullish trading continues in the WisdomTree Japan Hedged Equity ETF (DXJ), a fund highlighted here in early November. At the time of the DXJ recommendation, investors also were advised to buy shares of WisdomTree Investments, the ETF provider, and sell June $19 calls. Then, WisdomTree’s stock was priced around $15. It is now trading just under $19, a gain of about 27% in some four months. The call sold for 70 cents and was recently trading at $1.70. Investors should buy back the short call and sell the January $22 call recently trading at $1.75, to stay in the trade. Investors can also let the stock get called away and pocket the profits.

“Upside call buying in Japan-exposed ETFs (e.g. DXJ) has been a significant trend in the past week and investors are long a variety of calls in EWJ,” Susquehanna Financial advised clients in a recent trading advisory.

Toyota Motor Corp. (ticker: 7203.JP /TM), which was recommended here at $129 on Feb. 9 and is now trading around $136, is another popular Japan play. The automaker is a well-run business benefiting from a weak yen and strong U.S. dollar. When Toyota sells cars in America, for example, and the money is repatriated to Japan, the foreign currency conversion is incredibly favorable.



FactSet

For now, the essence of Japan’s rally, at least for traders, is that Japan’s central bank has aggressively increased its bond-buying program and the nation’s biggest investment accounts are buying stocks. When this was reported here in November, we advised investors the decision rewrote the investing playbook for Japan.

At the time, Bank of Japan said it would increase its bond-buying program to 80 trillion yen from JPY50 trillion. The nation’s pension fund also said it would lower its target holding of domestic bonds by 25% to buy domestic and foreign stocks.

Some may characterize recent Japanese economic data as mixed, but it seems good as gold compared to the turmoil in Europe, economic and political, and questions about China. Until those issues are resolved, Japan and America should remain some of the hottest markets in the world even though U.S. stocks are trading near an all-time high and Japanese stocks are levels not seen in 15 years. It’s a tense game, but there’s no place else to go.

 

Get investing analysis that moves stocks and markets—Subscribe to Barron’s for just $1 a week.

This article is from Barron’s and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron’s and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-03-04 14:14:25

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor

Technical Analysis

Waverly Advisors Summary Stats

%Chg: percent change from the previous day’s close

SigmaSpike: the day’s change expressed as a standard deviation of the last 20 trading days. Values inside +/- 1.0σ are generally insignificant, +/- 2.5σ are large (for the volatility of the particularly instrument), and +/-4.0σ are very large.

C/DayRng: the current price as the pipe “|” within the day’s range. Can easily see at a glance if trading near high or low of the day. The day’s open is “:”. You can read more about this indicator in my book.

For sectors: analysis is done using the State Street Sector SPDRs (XLE, XLF, etc.) %Chg is the day’s change for the SPDR, and Excess is the Excess Return for the day (the SPDR’s return – the S&P 500 return).

 

For more information about Waverly Advisors please click here.

2015-03-04 14:12:21

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor

Technical Analysis

Waverly Advisors Update: Largest Advances / Declines

The individual stock tables are simply ticker lists showing the largest values for the following criteria:

SigmaSpike: Largest volatility-adjusted moves. (Note that this measure, though we might call it a “standard deviation spike”, does not assume that anything is normally distributed. You’ll see a handful of +/-4.0σ moves on many days, and +/- 10σ do happen.)

GapOpen: The stock’s opening gap, expressed as a SigmaSpike.

FromOpen: Stocks often reveal stronger trending character by their relationship to their opening print, rather than to the previous day’s close. This screen evaluates the move off the open as a SigmaSpike.
 

For more information about Waverly Advisors please click here.

2015-03-04 14:09:52

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor

Technical Analysis

Waverly Advisors Afternoon Update

Largest Rel Volume: Stocks with the largest multiple of their 20 day average volume. Note that the “average” value for this number will change as the trading day progresses, but the relative position of a stock within this list should show some persistence. These are likely stocks in the news, or stocks experiencing a sharp flow of new information.

Largest Rel Ranges: First, we express each stock’s daily range as a % of the 20 day average range, and then choose the 10 with the largest values of that measure. These are the stocks with the largest daily ranges, relative to their own typical daily ranges.

Gap Analysis shows stocks with open gaps (today’s high < yesterday’s low or today’s low > yesterday’s high) remaining.

Stocks with Open Gaps (for the Day): ADBE, ADP, ALL, AMBA, AME, ANF, ATI, AZN, BBD, BBL, BC, BHP, BITA, BRFS, CAT, CBI, CCE, CENX, CHRW, CRM, CTL, DHR, FAST, FCX, FMC, GCI, GOLD, GPRO, GRMN, HDB, HIG, HSBC, HTZ(E), INFY, JCI, KMX, LKQ, LNG, LVS, MBT, MDLZ, MS, MSI, MWV, PBR, PBR.A, PEP, PNR, PX, RDS.A, RIO, RKT, ROK, SAP, SDRL, SPR, TCK, TRN, TRUE, TSU, VIV, VNTV, WWAV, WYNN

 

For more information about Waverly Advisors please click here.

2015-03-04 13:42:23

Posted by
Montreal Exchange

Contributor

Options

Yield Enhancing Opportunities in the Energy Sector

Investors have witnessed an important rise in activity in the Canadian options market over the last two weeks, driven mainly by trading in the bygone February expiry amid a spate of earnings releases from Canadian banks. While the financials were partially responsible for higher volume, it’s activity focused heavily on covered call writing given elevated volatility in the energy sector that is currently a dominant theme. As the energy sector remains under pressure and options premiums higher, selling calls on select names or a basket of names, such as the iShares S&P/TSX Capped Energy Index ETF (Ticker: XEG), is a potential strategy for investors who are seeking to improve yield. One should note that increased volatility signals a higher probability of being assigned at expiration, but the premium collected from covered call writing allows investors to reduce the overall risk exposure of their portfolio when compared to the traditional buy-and-hold strategy.

 

This article is from Montréal Exchange and is being posted with Montréal Exchange's permission. The views expressed in this article are solely those of the author and/or Montréal Exchange and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-03-04 12:02:58

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor

Options

Out-of-the-money Petrobras put options in play

Investors may well be honing in on overseas stocks that would fare poorly if the US equity market continues to slip. It appears that an investor paid 12-cents for 17,500 defensive put options expiring in July that would profit in the event of a further halving in shares of Petrobras (Ticker: PBR). The state-owned Brazilian oil and gas producer saw its shares slammed following an election that maintained the anti-business status quo last year at a time when the domestic economy was growing sluggishly. As a result the local currency has slumped, further detracting from the allure of Brazilian stocks. ADR shares in Petrobras are lower by 3.6% at $6.18, while the option trade focused on the 3.0 strike put option. Implied volatility of 65.9% is higher by almost 3% on the day.

Chart – Petrobras suffers in the wake of Brazilian election

 

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