Trading the ‘slingshot’ gains

Monday, 25 March 2019
Adelaide, Australia
By Bernd Struben

  • Less than 500 places remain…
  • Who should you listen to?
  • Senex Energy chart from 21 November 2018 article
  • Current Senex Energy Chart

We start this week with a special guest essay from veteran stock trader, Murray Dawes.

You’ll find that below.

But first, a quick word on fake news and the tumbling markets.

The fake news in question today was brought to you courtesy of US President Donald Trump’s opponents. Of who there are many.

Not just in politics. But embedded throughout the mainstream media as well.

A few hours ago, US Attorney General William Barr put some of that fake news to rest. Barr gave Congress a snapshot of Special Counsel Robert Mueller’s report into allegations of collusion between the Trump campaign team and Russia.

As an independent thinker I hope it came as no surprise to you that the entire investigation, lasting two years and costing untold millions of dollars, was little more than an elaborate smear campaign.

Trump, of course, took the news in typically staid fashion.

Here’s the tweet Trump sent out earlier today:

No Collusion, No Obstruction, Complete and Total EXONERATION. KEEP AMERICA GREAT!

You would think the mainstream media that’s been working overtime to vilify Trump would have the decency to at least wipe the egg off their faces and apologise for all the hype over nothing.

I was interested to see how the rabidly anti-Trump New York Times would report Trump’s exoneration. And I wasn’t disappointed.

You can see the headline from the New York Times in the screenshot I took from my computer this morning:



chart image

Source: MSN.com
Click to enlarge

No conclusion? Really?

Unashamedly biased reporting aside, I expected markets would bounce on the news that this particular witch hunt is all but over.

But not even the power of a vindicated Trump has been able to overcome investor fears of slowing global growth. At time of writing, futures on the S&P 500 are down 0.41%.

As Bloomberg reports:

Australia’s 10-year bond yield hit an all-time low after the yield on Germany’s 10-year bonds tumbled below zero and a closely watched gauge of Treasuries inverted for the first time since 2007, underscoring the return to globally low long-term rates.’

The closely watched gauge in question here is the US treasury yield curve. It inverted on Friday for the first time since 2007, meaning long term yields are now lower than short term rates.

Normally, in a strong economy, you expect to receive a higher return for the greater risk of investing over a longer time frame.

Though it’s not a perfect gauge, an inverted yield curve has been a fairly reliable indicator that the US is in for a recession. We all remember what happened in 2008, after all.

Now to the markets…

Markets

Over the weekend, the Dow Jones Industrial Average closed down 460.19 points, or 1.77%.

The S&P 500 lost 54.17 points, or 1.90%.

Tech stocks were among the biggest losers, sending the NASDAQ down 2.50%.

In Europe the Euro Stoxx 50 index finished down 61.67 points, or 1.83%. Meanwhile, the FTSE 100 lost 2.01%, and Germany’s DAX closed down 185.79 points, or 1.61%.

At time of writing, Asian markets are following their US and European counterparts sharply lower.

Japan’s Nikkei 225 is down 676.70 points, or 3.13%. China’s CSI 300 is down 1.70%.

In Australia, the S&P/ASX 200 is down 75.33 points, or 1.22%.

On the commodities markets, West Texas Intermediate crude oil is US$58.52 per barrel. Brent crude is US$66.61 per barrel. 

WTI is down 2.2% since I last wrote to you on Thursday. The fall comes as a slowing European economy and possible US recession has traders concerned about falling demand for crude.

That may be so. And it shouldn’t be ignored. But as I wrote on Thursday, ‘The big picture these days isn’t about the demand for oil it’s about the supply. And there is a global glut in supply.’

Of course, with the world awash in oil, if the demand side of the picture does take a hit, crude prices could fall fast and hard.

Turning to gold, the yellow metal is trading for US$1,312.00 (AU$1,854.94) per troy ounce. Silver is US$15.40 (AU$21.77) per troy ounce.

One bitcoin is worth US$3,970.00.

The Aussie dollar is worth 70.73 US cents.

Less than 500 places remain…

Without (much) further ado, I’ll hand you over to Murray Dawes.

If you’re not familiar with Murray, he’s the editor of the premium stock trading service, Alpha Wave Trader.

Murray went live with his proprietary ‘slingshot trading’ method in November last year.

If you’re a buy and hold investor, his custom trading system probably isn’t for you.

But if you’re experienced in the financial markets and understand that gunning for big gains with stock trading carries plenty of risk, you can find out more about Alpha Wave Trader here.

But don’t wait too long.

Publisher Kris Sayce and Murray Dawes have agreed to open the door to new members this week, and this week only.

Now over to Murray and why following along with most financial news is a complete waste of time.

Cheers,
Bernd


Who should you listen to?
Murray Dawes, Alpha Wave Trader

One thing I have noticed about financial news is that most of the experts speak in such a general way about things, that it is almost impossible to pin them down at a later stage to prove them wrong.

The markets are so volatile that you could say almost anything and claim that you were ‘correct’ at some point. Even if you weren’t correct up to that point, you can always say that you just need some more time until you are proven correct.

By talking in sweeping generalisations and never pointing out where they will be proven wrong, the experts usually play it very safe.

The outcome of this tiptoeing is that most financial news is a complete waste of time and if anything, adds to a novice’s confusion about what they should do.

How often do you see the experts looking back at their past calls? Almost never. There is very little accountability.

There is a healthy amount of cynicism around the financial press as a result.

But we need to get information about potential investments from somewhere, so the task of weeding out the wheat from the chaff is an important one that we all undertake.

So why should you listen to me?

My approach to the problem of proving to you that my prognostications are worth listening to, is to slowly and methodically take you through my philosophy, give you clear and definite predictions that can be followed up at a later stage and then actually follow up to show you how things played out.

This process takes time. But it is the only way I can think of that will separate me from the hoard of experts who sound great but say little.

We are finally entering the final stage of my little experiment, so in today’s essay I will follow up on what I have said previously about a little stock called Senex Energy Ltd [ASX:SXY].

It is an up and coming oil and gas producer with exposure to the gas shortage on the East coast of Australia.

They have plans to increase production from the current 0.84mmboe to an annual production run rate of 4mmboe by the end of FY21 and have a current market capitalisation of around $530 million.

I have written two articles about them. The first was on 21 November and the second was on 16 January. You can find the articles here and here if you haven’t read them already and would like to do so.

In the first article, I gave you a concrete set of expectations about the stock price from that point. It’s been four months since I wrote that article, so let’s have a look at the chart of Senex from November and what was said.

Senex Energy chart from 21 November 2018 article



chart image

Source: Alpha Wave Trader
Click to enlarge

 I’m not going to go into the technical analysis theory that I set out in the first article. If you are interested in such things, you should read the article in its entirety by clicking the link above. The main thing I want to zero in on is the actual prediction:

The buy zone range is from $0.27c to $0.31c and the current price sits at $0.415c.  So the buy range is 25% below the current price. That’s quite far away and we may never get the opportunity to buy in the perfect spot. But I am willing to wait and see what happens from here due to the overall bearish moves that are happening in equity markets and the oil price which plummeted last night.

Deciding where you will be proven wrong is of course harder to determine.  It all depends on your risk preferences. A short-term trader who wants to leverage up and is willing to be proven wrong quickly and get out to try again at a later stage could dump the position if we see a close below the most recent wave low in the current uptrend. That would be below 23c.

Let’s fast forward to today and have a look at what transpired in Senex since that prediction.

Current Senex Energy Chart



chart image

Source: Alpha Wave Trader
Click to enlarge

Senex did sell off over the next six weeks to a low of 26.2 cents, which was less than one-cent below the lower bound of the ‘Buy Zone’ of 27–31 cents that I gave you in the original article on 21 November 2018. From the low, the price of the stock rallied to a high of 39 cents, that’s a 48.8% rally in eight weeks and the current price sits at 36 cents.

I recommended to my clients to enter the stock at 30 cents, so we are sitting on some healthy gains after being in the stock for only a few months and we were never out of the money on our position by more than one-cent.

I say this to make the point that this wasn’t just an article sent out into the ether that never lead to any actual trading. The logic that I outlined to you in the first article was the basis for a live trading recommendation.

So my little experiment is at an end.

My own scepticism of the financial press means that when I write I want to provide valuable information and if I make any sort of prediction that it is specific and falsifiable.

That means that I have to bring you along with me on the journey into my technical analysis methods and logic and I have tried to set those out for you in a clear and concise way in the earlier articles.

But I understand how confusing it can be for people who don’t have much experience in charting and that a lot of people switch off completely because they think it is a bunch of baloney.

That’s why I wrote the first article in the way that I did, and four months later I’d say predicting a 25% fall to within one-cent prior to a 50% rally, should be enough to have a few sceptics scratching their head. But maybe not.

There is of course, far more to my technical analysis model than I have already written about, but it can be quite a dry subject to write about at the best of times and I prefer to use a show and tell method by recording my computer screen as I describe things to traders. It’s a much easier way to dive deeply into the nuts and bolts of price action.

I do a quick video every Monday for Money Morning that outlines my view of the week ahead. So if you are interested in learning a bit more, why don’t you tune into that each Monday.

Regards,

Murray Dawes,
Editor, Alpha Wave Trader


Finally, here’s the latest in politics from The Australian Tribune:

‘New Zealanders Fight Knee-jerk Gun Law Changes’

If there’s anything worse than rushing through new laws it’s rushing through new laws in a highly emotional state.

Following the massacre of Muslim worshipers that left 50 people dead in a Christchurch mosque, New Zealand’s politicians are obviously highly emotional.

Now, more than ever, they need to take the time to...’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.