IB Traders Insight


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Macro

GUOSEN Closing Bell (May. 05)


MARKET

Chinese stocks closed mixed today, with the benchmark Shanghai Composite Index ended at 2997.84 points. The A share market continued to fluctuate around the flat line, concerns over sustainable growth lingered, commodity price and yuan continued to fall. Media and computer sectors led the gains; while oil and bank sectors led the falls. Combined turnover for both markets was 474.1 bn yuan, down 11.4% dod.

 

CLOSE

%CHG

VOL (bn yuan)

%YTD

SH Composite

2997.84

0.22

163.1

-15.30

SZ Component

10474.01

0.49

311.0

-17.30

CSI300

3213.92

0.14

83.9

-13.86

ChiNext

2224.1

0.59

84.0

-18.05

 

Sector

Top 1

Led by

Top 2

Led by

Upward-leading

Media

000793

Computer

300277

Downward-leading

Oil

600378

Bank

600015

 

NEWS

*The nation's top planning authority pledged on Wednesday to adopt more proactive measures to expand investment in order to sustain the economic recovery. Following the new lending boom in the first quarter, the government will actively encourage commercial banks to issue credit and attract investment from the private sectors in the second and third quarters, when more construction projects are expected to start, according to a statement by the National Development and Reform Commission. Fixed-asset investment surged 10.7 percent year-on-year during the first quarter, as government-led investment in infrastructure construction "played a vital role", the statement said. (China Daily)

*As the 2015 profit reporting season comes to an end, the performance of domestic coal companies seems weaker than earlier expectations, due to overcapacity, poor demand and lower prices, Securities Daily reported on Thursday. Last year, 39 listed coal companies reported a net loss of 5.1 billion yuan ($785.4 million), plummeting 1,120 percent year on year, the newspaper reported, citing statistics from Choice Data, a data brand under East Money Information Co Ltd. Shaanxi Coal Industry Co Ltd posted the biggest loss, 2.99 billion yuan, followed by SDIC Xinji Energy Co Ltd, 2.6 billion yuan, and China Coal Energy Co Ltd, 2.5 billion yuan. (China Daily)

 

 FUND FLOW

Click here for more information about Guosen.

This article is from Guosen Securities Co., Ltd. and is being posted with Guosen Securities Co., Ltd.’s permission. The views expressed in this article are solely those of the author and/or Guosen Securities Co., Ltd. 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.


9471




Macro

European Market Outlook: Ascension Day Holiday expected to keep trade subdued


Morning Briefing May 5th 2016


There is little on the European calendar Thursday, with many centres closed for the Ascension Day holiday.


However, there is plenty in the UK to keep trader’s attention.


Throughout the day, the polls will be open in The UK for local and regional elections. The main focus will be on elections for the Scottish Parliament and for the London Mayor's office.


Also in the UK, at 0730GMT, the April Halifax House Price Index will cross the wires.


At 0800GMT, the ECB will publish the latest Economic Bulletin.


The main UK data release will come at 0830GMT, when the Markit/CIPS April Services PMI data will cross the wire, along with the Composite data.


Across the Atlantic, the US calendar gets underway at 1130GMT, with the release of the Challenger Monthly Layoff Intentions.
At 1230GMT, the Canadian Building Permits data is expected. At the same time, the latest US Jobless Claims numbers will cross the wires.


The level of initial jobless claims is expected to rise by 3,000 to 260,000 in the April 30 week after a rebound of 9,000 in the previous week from a 43-year low.


At 1315GMT, ECB Gov Council member Vitor Constancio will sit on a panel at workshop "Re-Inventing the Role of Central Banks in Financial Stability", in Ottawa, Canada.


The US natural gas storage numbers will be published at 1430GMT.


At 1550GMT, the St. Louis Federal Reserve Bank President James Bullard will speak about the economy in Santa Barbara, California The US April Treasury STRIPS will be released at 1550GMT, with the latest M2 money supply data expected at 2030GMT.

 

Global Economic Trading Calendar


 

Markets


FOREX: The US dollar had a mixed session this morning in the Asia-Pacific, as it traded essentially sideways against the euro and the yen but marked small losses on the aussie. Australian data releases were partly responsible for the rise in the aussie but the overall impact has been muted. Japanese markets are still on holiday today, and the market remains focused also on this Friday's US non-farm payrolls release. Dollar-yen was last at Y107.08 in a Y106.87 to Y107.22 range today. Aussie-dollar was last at $0.7492, at the upper end of a $0.7452 to $0.7495 range. Euro-dollar was last at $1.1486, after a $1.1483/95 range this morning. It closed at $1.1488 last night in the US.

US INDEX FUTURES: US stock index futures are trading with a bid tone on the back of higher oil prices, which currently see the Jun'16 WTI contract up some 2.17%, as wildfires in Canada's Alberta province impact shale output. Currently the Dec'15 e-mini S&P futures are trading up 6.75 points at 2,053.75, the Dec'15 e-mini Nasdaq futures are trading up 16.25 points at 4,326.00, while the Dec'15 e-mini Dow futures are trading up 50 points at 17,631.

US STOCKS CLOSE: US stocks closed lower today; the DJIA is down -.56% at 17,651, the S&P500 is down -.59% at 2,051 and the Nasdaq Composite -.79% at 4725.On April 20, the DJIA posted a new 2016 high of 18,167.63, the S&P 500 a new 2016 high of 2,111.05 and the Nasdaq a new 2016 high of 4,969.320. This compares to the life-time highs of 18,351.36 (May 19) and 2,134.72 (May 20), seen last year and for the Nasdaq, last year's peak of 5,231.942, seen July 20. Yesterday’s risk aversion moves starting with the RBA lowering rates, and continuing into the yields, has turned the outlook negative. Today has seen a follow through to the downside; the S&P500 has broken support at the April 29low of 2052.38. Further support can be found at 2039.74, which is the April 12low; the 55-DMA is located at 2030.07.

US TSY FUTURES: Treasury futures have seen very little reaction to the China Caixin services PMI which showed that the service sector contracted to 51.8 in April from 52.2 in March. The market saw more volumes over the Australian retail sales numbers which showed an improvement in March and perhaps saw some square up long AU/US 10yr spreads in futures space. Currently 10yr futures are trading 0.5-tick from the close on light volumes of 13k.

JAPAN : Markets closed for the Children's Day Holiday.

PRECIOUS METALS: Gold, silver and platinum have seen choppy / mixed trade within their session's ranges to this point in the Far East, with no obvious causative factors or correlations directing the play, although liquidity remains impacted by the absence of  Japanese investors (gold and silver transacting at average levels of volume but the PGM's moving around on 'air'). Prices firmed in pre-market CME trade before the complex was pushed lower at what would normally be the TOCOM open. The metals remained under pressure for the first hour and a quarter of Shanghai trade before steadily erasing the entirety of the morning's losses to reclaim their NY closing levels, finally drifting back from the upper end of the day's range as Shanghai lunch descended. Today's Yuan Central Parity Rate was set at 6.5128 by the PBoC (vs 6.4943 yesterday) and the Shanghai Composite Index opened -0.14% lower (2,987.02) and was -0.26% lower (2,983.39) at 0330 GMT. Finally, the Caixin China Service PMI (Apr) came in at 51.8 (vs 52.2 in Mar).

OIL: WTI crude oil futures for Jun'16 delivery last up $0.87 at $44.65 per barrel, after a $43.78 to $44.80 range in Asia today, on solid volume as the jun'16/Jul'16 spread begins to trade in earnest. The final day of Japan's Golden week but buying has come in size with fires in Canada's oil sands area being blamed. The DOE/EIA data continue the recent run of lower production but higher inventory, but for now it's the production side that's the focus, and events such as the Fort McMurray fires just add to the bid. Resistance is still ahead, firstly yesterday's high ($44.88) then the bigger resistance from $45 to $50 a barrel.

 

Technical Analysis


BUND: (M16) Bulls Need Close Above Falling Trend Line

*RES 4: 164.60 High Apr 11
*RES 3: 164.17 High Apr 18
*RES 2: 163.74 High Apr 20
*RES 1: 163.14 Falling daily trend line

*PREVIOUS CLOSE: 163.05

*SUP 1: 162.59 Hourly support May 3
*SUP 2: 161.84 Low May 2
*SUP 3: 161.46 Low Mar 27
*SUP 4: 161.02 Low Mar 15    

*COMMENTARY: Pressure has returned to the 163.07-14 region where the 21-DMA and falling daily trend line are located with bulls taking additional comfort from correcting O/S daily studies. Bulls now look for a close above the falling daily trend line to shift focus to layers of resistance 163.74-164.60. Initial support remains at 162.59 with bears needing a close below to gain breathing room and reconfirm focus on 160.81-161.46.

EUROSTOXX: Immediate Focus Shifts To April Low

*RES 4: 3185.13 200-DMA
*RES 3: 3156.86 High Apr 21
*RES 2: 3067.61 Alternating daily support/resistance
*RES 1: 3002.53 55-DMA

*PREVIOUS CLOSE: 2938.75

*SUP 1: 2860.32 Monthly Low Apr 7, Bollinger band base
*SUP 2: 2801.43 Low Feb 24
*SUP 3: 2786.21 Low Feb 15
*SUP 4: 2672.73 2016 Low Feb 11

*COMMENTARY: The correction lower continues with the close below the channel base (2959.05) adding weight to the bearish case and shifting immediate focus to April monthly lows. Daily studies have room to move before becoming O/S. The 3002.53-3067.61 resistance region remains key with bulls needing a close above to regain control and shift focus back to 3156.86-3195.79 where the 200-DMA is noted.

 

Eurex Futures Market Close



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This article is from Eurex Exchange and is being posted with Eurex Exchange’s permission. The views expressed in this article are solely those of the author and/or Eurex 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.


9470




Technical Analysis

Natural Gas (NG) Retesting Daily Chart Horizontal Resistance Ahead of Weekly Storage


Natural Gas (NG) surged over 3% yesterday, continuing the bounce off triangle support (on the daily chart) and breaking downchannel resistance (on the 4hr chart).  Given that weekly storage figures are released today at 10:30am EST, NG is poised for a volatility spike post-data.  Up until the start of the US session, trading will be relatively subdued with the holiday in much of Europe.  Weekly, daily and 4hr RSI, Stochastics and MACD are consolidating recent gains or rallying.  I am flat now but will look to go long on any knee-jerk selloff post-data, particularly in the 2.1-2.14 range.  If the figures are more bullish than expected and NG rallies, I'll likely join the rally and would target triangle resistance (on the daily chart) over the next few days.

 

Natural Gas (CME NG Jun16) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on USDCAD, EURJPY

 

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.

 


9469




Futures

Volatility for Crude & Aussie Dollar


Jim Iuorio, CNBC Contributor & TJM Institutional Services

This video is from CME Group and is being posted with CME Group’s permission. The views expressed in this video are solely those of the author and/or CME Group and IB is not endorsing or recommending any investment or trading discussed in the video. This material is for information only and 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 by IB 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.


9468




Options

Sarepta: A High-Risk, High-Return Trade


Ahead of an FDA decision, the options market is paying investors top dollar to bet on the DMD drug maker.

 

If you like options volatility, you’ll love Sarepta Therapeutics.

The controversial biotechnology stock’s (ticker: SRPT) overall implied volatility is 341%, compared to 41.7% for the SPDR S&P Biotech (XBI) exchange-traded fund, and 13.8% for the Standard & Poor’s 500 Index.

Many investors focus on options with high volatility because the profits can be as extraordinary as the risk. Sarepta’s implied volatility is probably the highest among the 4,000 stocks that trade in the options market.

Implied volatility translates to expected stock price moves. Sarepta’s implied volatility indicates that the shares are priced in the options market in anticipation of 21% daily moves. This reflects how Sarepta stock has more than doubled in value since hitting an intraday low of $8 last week, in reaction to a Food and Drug Administration advisory panel vote against approving the company’s drug for Duchenne muscular dystrophy. The volatility also reflects how difficult it is to know whether the FDA will approve the drug, eteplirsen, at a May 26 meeting.

To pre-position for drug approval, aggressive investors can buy the stock and sell puts and calls. The trade will be extraordinarily profitable, or it will crash and burn in a defined risk kind of way.

Here’s the trade:

With the stock at $17.83, investors sell the August $22 call for $4.50 and the August $12 put for $3.60. This combination strategy – long stock and short put and call – obligates investors to sell stock at $22 and to buy stock at $12 at August expiration.

“For those willing to take on Sarepta’s risk, the options market is willing to pay you a significant premium,” says Michael Schwartz, Oppenheimer & Co.’s chief options strategist.

If the stock crosses $22, investors are obligated to sell the stock or to cover the call at a higher price. The effective sale price is, of course, sharply higher than $22. It is $30.10 – the strike price plus the $8.10 premium. Still, one analyst thinks the stock could trade to $60 if the drug is approved. If that occurs, investors will become well acquainted with upside regret.

The downside risk – and it is substantial – is that the stock falls to zero if the FDA fails to approve the drug at the May meeting. Such catastrophic options risk is hedged, to a degree, by the trade’s structure. Because investors collect $8.10 for selling the put and call, the total loss is limited to $3.90 ($12 strike less the $8.10 premium). Of course, anyone who buys the stock is exposed to the full risk of the market. If the stock goes to zero, investors lose the money spent.

Bottom line: Sarepta is the poster-child for high-risk, high return trades.

Steven M. Sears is a Senior Editor and Columnist with Barron's. He is the author of "The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails." Mr. Sears previously reported for Dow Jones Newswires and The Wall Street Journal. He has reported upon most major modern financial events, including the Asian Contagion, the bursting of the Internet Bubble, the Credit Crisis, and Europe's sovereign debt crisis. He also was part of exchange executive teams that modernized the U.S. options market, and introduced electronic trading. Interact with him on Twitter @sm_sears.

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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 for information only and 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 by IB 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.


9467




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