The path of trading is difficult but achievable if you persist

I'll be away from the 19th April till the 4th May so I won't be around to produce new content. I decided to to re-publish old blog posts that focus on the psychological aspects of trading so I hope you enjoy! See you soon 

Finding a Purpose in Your Trading

Recently I met up with an old school friend of mine and spent some time talking about time gone past, good times, bad times and our future prospects. He has been studying Pharmacology for 7 years and fast approaching the end of his Masters which makes me glee with pride. I know the hard work and dedication it takes to stay immersed in one aspect of your life together with a steadfast belief in a career path to ensure lifelong fulfillment.

But what struck me the most is when I found out why he had chosen this particular field of study. He had always shown a strong interest in biology but many would have thought it as normal, a preference or easy understanding of the subject yet I truly never knew why or asked until he told me his story recently.

He grew up with his grandfather and formed a very close bond with him. However his grandfather was diagnosed with cancer. You can only truly appreciate an impact of such life changing events when you get to live through it. He was very young and the thought of losing his grandfather, as anyone can imagine, left him shattered. 

He sat next to his grandfather's bedside until he took his last breath and that moment he vowed that he would dedicate his life to cancer research in memory of his grandfather because of what he had felt during that experience.

Finding a purpose in life comes from our past experiences, hard or easy. What we value the most in our lives will ultimately determine the direction of our aspirations. We can never say with absolute certainty where our lives are headed yet we are in control of our desires. The desire to prove that no matter what the situation, we have the will and determination to overcome the most fearful experience and turn it into our greatest achievement. 

In trading most will agree that anyone who decides to embark on this journey as have millions of others before them have done so based on the goal of making money. Not to say that the profit motive is the wrong reason, but if you solely base your desire to be rich you'll end up finding your patience with the learning curve wearing thin. 

The amount of times you have to endure failure is more than you can imagine. The psychological impacts of these can be devastating to say the least but you have to have the drive to brush these aside and continue. There are no shortcuts when it comes to trading success, only the path less travelled.

Reflection is a great tool to discover yourself. Thinking about what drives you to keep coming back is really going to help you persevere. There are going to be times when your trading day is a total frustration but knowing your purpose to succeed is crucial to keeping you on the right path. 

Finally never forget those experiences that define you, the moments in your life which became the turning point of everything. Most often you will find them to be the difference between you pushing on or simply giving up. 

"The greatest glory in living lies not in never falling, but in rising everytime we fall"- Nelson Mandela

Dealing with disappointment is a common feature when trading

I'll be away from the 19th April till the 4th May so I won't be around to produce new content. I decided to to re-publish old blog posts that focus on the psychological aspects of trading so I hope you enjoy! See you soon 

5 Effective Ways to Cope Going From Hero to Zero 

When I see volatility in markets spike up my initial thought is not my own account but those of other traders who have failed to exercise proper risk management principles. On more than one occasion I have seen many trading colleagues lose every last cent in their accounts due to the lack of discipline, the thrill of catching a move or the need to be in the market at all times.

So I thought I’d give you some pointers on what to do should you find yourself in the same situation and how to deal with it. A harrowing experience to encounter but one that allows us to extract a great deal of learning from whether it be our own accounts or someone else’s. 

Is trading the right thing for me?

This is certainly an important question you need to ask yourself as you get to a point where you begin to make sense of it all.  Not everyone is cut out to be a trader as it requires you to assume significant levels of risk that might not sit well with your personality.  If you think about the number of featured films chronicling the life and times of some of Wall Street’s infamous players you do get the sense of exuberant lifestyle with endless bank balances.   But note the extremities in their behaviour from explicitly euphoric to manic monsters.

At the end of the day their lack of emotional control lands them in serious trouble which is the same fate you could meet should you fail to keep your emotions under wraps.  Hollywood may try to idolise these misfits but your trading account won’t. It spits out the unbiased consequences of an ill disciplined trader. 

Doing the trading detox.

When you’ve suffered huge losses on your account the sensible thing to do is step away for some time to allow your mind to revert back to reality. What we don’t realize at the time is that the punishment we’ve subjected our minds too while attempting our ill-fated actions has wrecked our logical train of thought by unsettling the balance. Release your mind from the worry by doing something different from your routine.

You find that we become so encapsulated by the market that we don’t give ourselves sufficient time to cool off to emotionally repair our minds by thinking of what has played out. We so caught up in the moment we believe there’s a need for our presents in the market because the next move could prove fruitful or fatal.

The markets have stood the test of time; it will always be there for those to profit and those willing to give it all away. 

Identifying where you went wrong.

Let’s face it no one likes to admit they made mistakes, we all like to think we perfect but in today’s fast paced world it’s very easy to trip up.  Trading falls into the same category of thinking when we fail to fully accept the responsibilities of being wrong. 

Your trading account didn’t end up this way by chance; somewhere along the line of process you miscalculated your decision.  Be truthful to yourself and do an honest assessment of your actions without being regretful of what you have done.  No one is immune from the markets ability to point out precisely the many flaws they possess.

There’s two ways of thinking about this, either you take it as the market making you look like a fool or you see it as a chance to put it under a microscope, see where it was that you messed up and correct it so that the next time the same situation comes around you have a better understanding on how to deal with it. 

Taking time to build new trading capital.

Trading capital is precious and when lost that feeling you get in your gut knowing that its gone isn’t pleasant.  Money and more specifically losing it is a very sensitive issue for most people, I can’t think of why it wouldn’t, but trying to “get back” at the market to reboot your cache really isn’t the smartest thing to do after a heavy drop.

Use it as an opportunity to build up your capital by placing emphasis on the work needed to reach the level to be fully operational again. This way you’re learning to appreciate the value of trading capital and more prone to taking care of it. 

Finding trading support groups.

In the age of technology it’s never been easier to find like-minded people with similar interests and experiences willing to share it with you.  Social media is home to many a forum on a variety of interests with trading not being an exception. However be cautious when choosing who to follow as it has a detrimental effect on your progress.

Sharing your experiences in the company of others who have faced the same circumstances enhances your ability to accept your mistakes and seek advice on ways to deal with it. Added to the fact that it aids your growth being exposed to other traders it also nice to know you have a refuge to go to when you hit those low points and in need of motivation. 

The Essential Skills needed to be a Trader

I'll be away from the 19th April till the 4th May so I won't be around to produce new content. I decided to to re-publish old blog posts that focus on the psychological aspects of trading so I hope you enjoy! See you soon 

The 4 Traits of a Successful Trader

I have to admit that I'm a huge soccer fan and over the years I've built a certain affinity to one team in particular. But today isn't about testing our loyalty to one team or who's currently leading the league. It's about highlighting the advantages of consistency in every area of our lives and how having the right mindset is essential in ensuring long term success.

Sir Alex Ferguson is one of football's most successful managers of all time. His records speak for themselves and the time he spent during his 26 and half years at Manchester United has been described as "the Impossible Dream". His built up a number of teams all of which have been able to exhibit a distinct progression in the game of football.

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However what strikes me the most is his performance record over the years. I was able to find them on a Man Utd fan site. According to the website Ferguson was in charge of the Red Devils for a total of 1500 games of which he only won 895. That would give him a win ratio of 59.67%.  In other words every time he assembled his team and marched them onto the pitch, he had a 60% chance of winning the game.  Under his reign his players scored 2769 goals for the team and only conceded 1365.

Here's a few things I think is most important about the stats

1. Although he won 60% of his matches he was able to accumulate a cabinet full of trophies. This speaks so closely to a trader as it does in football. A league isn't won in a single game but rather over a season of games cumulating in the most consistent team winning the cup. In trading we often feel disheartened by one loss but don't realize that it takes more than one trade coupled together with good discipline to build our accounts. 
2. Ferguson was known to manage his players well both personally and skillfully on the field. He knew each player's attributes and used them to their full potential. Trading is much the same in the sense that each indicator we use should be fully understood and accepting that they don't always workout isn't a train smash. Our jobs is to be consistent. 
3. The goal difference at the end of his career was a staggering +1404. For every goal conceded the team was able to score 2. When trading it's always imperative to be rewarded with more profits than losses so that you're able to be profitable. It's a simple equation that so few exercise. 
4. Finally time is the most underappreciated asset of a trader's career. Spending close to 27 years at the helm, Ferguson was able to capture the most prestigious titles in the world because his team was prepared when those moments of glory awaited them. The same goes for a trader. Time is your friend not the foe. Being able to survive the markets in times of drawdowns allows your system enough time to work when the conditions become right. 

Drawing from the philosophies used by Sir Alex one can see how playing a game is a lot more than just winning. It's about being in control of your emotions and guarding your goals when tough times loom. The real reason people stay in a job that long is because they have a passion for the game, money comes secondary and when you are able to reach that point in your trading journey you'll be able to say that you've successfully mastered the skill of trading. 

Travelling Technicals with Global Indices: KOSPI

So far in this feature we have looked at 3 out of 4 Asian indices representing the biggest and perhaps the most influential powers within the continent with analysis of the Nikkei 225 of Japan, the Nifty 50 of India and the Hang Seng, Shanghai Composite and CSI 300 tracking the performance of China. Today we complete the quartet by analysing the KOSPI of South Korea, another major Asian economy that's in recent years matched the quality of Japanese products with parallel passion to be amongst the top leaders of technological development in the world.

A common feature that's shared between the Korean Stock Exchange and the Tokyo Stock Exchange is the amount of corporations listed with both boosting well over 2000 listings that remains an impressive feat when considering a similar amount of companies listed on the New York Stock Exchange.  The extent of companies coming to this form of capital market to raise funds does give a feel of a capitalistic nature around the economy which proves true for all three of the nation's stock exchanges mentioned.

 The two most distinct companies that stand out for many would be Samsung and Hyundai. Many would be familiar with products bearing the logos of these brands however what is not always known is the fact that consumer electronics and cars aren't the only products that are manufactured by the respective companies. Steel mills, chemicals, construction and a variety of other products are sold through these global conglomerates.

Politics in the country is stable however tension is often experienced with neighbours North Korea who hold an opposite political system to South Korea. Because of these tensions, the Korean Peninsula has become a hive of high profile nation debate with the US and Japan siding with the South and China protecting the North. There never seems to be a concrete outcome between both countries which places a lot of attention on the antagonistic attacks on one another fuelling speculation of an impending war, heightening risk levels.

Let's get to the charts;

Monthly

A strong uptrend that's been in place since the early 2000's that produced enough strength to hold steady during the Financial Crisis. Strangely the rally that set off after the low's were registered in 2008/09 was able to break through previous highs but has since been uninspiring in it's quest to seek higher grounds. This makes for a worrying bullish outlook with pressure starting to build from the longer term players who haven't seen positive returns in a number of years. Their anxiety might be the seed that grows disinterest in keeping their hands steady. 

There is a uptrend in place so it'll be interesting to see whether it will be tested anytime soon. If that were to happen we'd need to see a breakdown below the support of 1800 with the move expected to be quick and volatile. However we shouldn't ignore the resistance of 2200 which has only been tested twice whereas support being pushed a lot more times suggesting that buyers aren't willing to let go just yet. 

Weekly

I've included the chart above to show that there are some charts that simply can't be read which ever way you try to look at them. This is the weekly of the KOSPI and does in it's own chaotic way sum up the price action we saw on the monthly. What it also says is that if we're confused by what we seeing, what must traders or investors be thinking that actively follow this index be thinking? 

In saying this I thought that because this index represents the performance of each share listed on the Korean Stock Exchange there should be another index that mimics the general movement. The KOSPI 200 is an index that tracks the returns of the 200 biggest stocks listed, so here we have an index that possesses fewer stock but because it's the biggest companies more than likely it constitutes the most of the KOSPI movement anyway. 

A much tidier chart compared to the previous one now allows as to assess whereabouts in the range stock valuation sit currently. From what I see I'd say we are hovering around the middle of the range which doesn't produce a great edge if considering a trade. Usually you'd be looking to the extremes of the support and resistance to place a trade so that you have a clear indication of the direction. When in the middle, price can go in either direction. 

The price has knocked up against the resistance in the region of 270 and 275 a number of times but failed to surpass that level indicating that sellers have dominated the buyers whereas the support of 220 might be slightly more flimsy, an important note to take when going forward.   

Bringing order into your risk management technique

I'll be away from the 19th April till the 4th May so I won't be around to produce new content. I decided to to re-publish old blog posts that focus on the psychological aspects of trading so I hope you enjoy! See you soon 

Improve your trading with the 2% rule

When it comes to trading the success of your endeavours is a function of your ability to contain your losses so as not to let them get out of hand and create mass portfolio destruction.  Debate around the different forms of risk management within the trading process is wide ranging and somewhat complicating for the new trader. So today I want to highlight probably the most known risk management rule so that you are able:

·         better understand the concept around controlling your losses

·         you have a foundation from which to work from towards other methods

So the first thing we want to understand is that when it comes to trading there are always time when you are going to lose, period. If you hear or see a person claiming to have a 100% full proof system it’s a lie. Trading is about probabilities of certain patterns working in your favour but take note having probabilities do open you up to also working against you.

 An easy way to think about this is by envisioning a champion sports team playing against a minnow.   The odds are in favour of the champions because they wouldn’t be self-declared champions without proving themselves through a series of matches against various opponents at every level.  However nothing stops the minnow team from playing with skill only. They could bring a valiant attribute to their game and shock fans and the world over by upsetting the odds and winning the match.

What evokes such a trait to beat the odds?

 Answer: human emotions simply as that.  Whether it be arrogance and overconfidence on the part of the champion team or bravery and ambition from the minnows.  Human emotions have the tendency to make the impossible become possible.

The same emotions experienced in sports are identical to the feelings you’re going to encounter when trading which is why you have to have plans in place to stop you from making costly errors.  Can you imagine a team with no manager that concedes a goal, a try or even a wicket against itself? It would be panic everywhere as there is no clear tactic with how to deal with the situation which leaves the team vulnerable to similar offensive plays putting them in a worse position. 

The same applies if you were to take a trade for no reason and suddenly slip into losses. With no clear rules your mind would run ragged trying to figure the best plan of action but in a constantly price changing environment. 

Now that we've built a case for why you need to be employing risk management let’s get down to the real business of the day and that’s to understand how the 2% Rule works.

   

It’s quite easy. So let’s assume you have a R50 000 account. The premise of the rule is you are not willing to lose more than 2% of capital on one trade. What does this mean? Simply put if you were taking a trade you won't be willing to risk more than R1000 (R100 000 x 2%). If you lose you are only losing R1000. But why do we use 2 per cent?

On the table below you’ll see the percentage needed to reverse a loss back to breakeven in terms of your capital.  On the far right hand column is the balance after incurring a loss at each particular percentage. The column before that is the amount the loss would equate too.  The middle column shows the percentage needed by a winning trade to go back to breakeven. The last 2 columns represent the loss as a percentage of the account and the starting capital.

So let’s assume the worst and you lose all your money, basically there’s no chance of you getting it back since all your money in the game is gone. Next would be 75%, you would need to increase profits 3 fold to get back to break even.  Now I’ve seen in my experience guys who find themselves in this position and try desperately to get back to these levels and over gear themselves and that eventually leads to even bigger losses. This is rife among new traders who fail to employ proper risk management principles.

As you go up the table you see that the less you lose the less the percentage needed to recover from the losses. Take 10% for example you’d only need 11.11% but to risk 10% on one trade means 10 trades gone wrong and you’re done. Let’s face it, as a new trader it’s possible to make mistakes and 10 wouldn’t be impossible for a new person starting.

But now here’s a thing, at 2% loss, you would need to lose 50 times to wipe out your account and that I can say it virtually impossible to do.  This way you are allowing yourself enough capital at risk for you to be able to master the markets and at the same time having risk in your favour.  

Now let me tell you from first-hand experience mastering the markets is no small feat so having risk on your side makes all the sense. Although the gains will be smaller compared to the same trade but larger exposure you have a greater chance of surviving severe market conditions when your system does not respond to the market and thus saving yourself from trading disaster. 

 It’s important to note that this is not the only method of managing your trading risk. There’s always been fierce debate regarding the merits of each method. We not here to debate that but if there is one distinct characteristic of this method it’s that it’s relatively simple to understand and implement. Especially for new traders who don’t have the skill or expertise in trading and require an effective risk management rule to keep them in the market for as long as possible because at the end of the day the longer you stay in the game the better your chances of long term profitability. 

Volatility is often misunderstood when trading markets

I'll be away from the 19th April till the 4th May so I won't be around to produce new content. I decided to to re-publish old blog posts that focus on the psychological aspects of trading so I hope you enjoy! See you soon 

How to Deal with the Roller Coaster Ride of Trading

Recently I was asked by a person close what it felt like being in the middle of a volatility storm as the one we experienced last month. At first I wanted to describe it as exciting, something a thrill seeker would get a kick from but then I thought about newer traders who had yet to experience these kind of conditions and the emotional response which was awoken through all of this.

In saying this, I thought back to my first experience in these topsy turvy movements and how I had to face up to some of my most scariest trading fears.

When you're still new to the game you'll gather snippets from the pro's on how you see flashes of price movements before your eyes. They immediately bill it as a very unpleasant experience and in the back of your mind you begin to have second thoughts, hoping that these kind of situations don't surprise you anytime soon.

If you ever been on a roller coaster you'll know that anxious feeling you get when you queue in the line and start hearing what others in the queue are expecting. Psychologically you are building up the tension inside and try to rationalise what you're about to do but your fears won't back off.

You're getting closing to the front and your heart is racing,  your breathing is restricted and your face turns pale.Your friend turns and says to you "Hey man stop looking squeamish , it's just a roller coaster. Nothing to be scared about". But your anxieties won't go away. You manage to convince yourself that this is it. Time to take the plunge.

The attendant makes sure you're strapped in safely and goes through the whole line. He gives a signal to the controller and suddenly the coaster begins its ascent.

The distance between the coaster and the top of the line is getting shorter and shorter and you're panicking, legs dangling in midair and an eerie silence has taken over the general  mood. And then...

Boom the wind blasts your face with rapturous force increasing your anxiety. You tense up and your body feels paralyzed and...Wowwee up and under racing along the track with no limitations twisting and twirling approaching the next bend fast, ready for cork screw.

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Sssshhh you going around in a circle at such a fast pace you can't place your direction and that's when you finally let go and let the force of the coaster dictate the control of your body.

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The coaster begins to slow down and you start to feel your muscles relax and relief that it's all over until it comes to a halt.

What I've just explain is what someone who has a phobia of roller coasters, coasterphobia, would experience. This is exactly how it feels when you hit high degrees of volatility. The speed at which it happens is quite fast and violent and there's absolutely no control.

These conditions do blow into the markets every so often and it's imperative for you to know some basics steps to follow if you do encounter them.

Firstly don't try and trade on instinct, there are always temptations when moves such as these materialize. These conditions are quick and you're execution needs to be accurate. Best left to the traders who've had a few years worth of experience to fall back on.

Secondly, ensure that you're strapped up at all times. What I mean by this is your risk management rules. If you are feeling brave and capable enough to trade always make sure you have a stop loss as profitable trades can quickly turn into losses in a matter of minutes.

Thirdly, trade with less gearing, it's always difficult to call when such conditions are going to end so one way of entering a trade without standing the risk of getting stopped out all the time is to begin with a very small position. This way you're allowing your position breathing space and flexibility. Once you're certain the worse is over you can begin building your position to full capacity.

And lastly remember that the best thing to do when you don't see high probability setups is sit on your hands and wait for the chaos to subside. Once it has the best opportunities will present themselves.

The comparison between trading and marathon running

Going the Extra Mile

Recently my sister completed the Loskop ultra-marathon after months of gruelling training and grit determination. I know for one the hours of dedication taken to reach such a tremendous feat. On occasion I would go for an early morning jog for moral support but quite surprisingly learnt more about the power of my mind than  I had expected.

As with anything in life, when we start something new we often head into it with much vigour. My first jog around the block was quite an eventful one. My sister kept teasing that I wouldn’t be able to clear 5km in 30 minutes. Determined to prove her wrong I set about my quest, only to be stopped by my pure exhaustion on the 3km mark.

Defeated and deflated I conceded that my fitness levels were not what they were once before, but I was dead set on figuring out the science of running and how a person were able to push their body through many kilometres of tarmac.

 If you’ve ever watched the Comrade’s Marathon you’ll know the admiration you have for the guy who crosses the line in under 6 hours. To put that into context that’s roughly 15 km/h non-stop for 6 hours. I couldn’t clear 3km in 15 minutes let alone run 15km in one hour. But take note that we always benchmark ourselves against the best. We don’t really pay attention to the other thousands of runners who complete the same race just in a longer time.

When you run distance you not going start the race running at a pace of 100 metre sprinter. I guarantee you won’t have any energy left for the next 10km. Slow and steady wins the race.

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These were the first lessons my sister taught me on our first jogging expedition. We started small distances so I could gain my fitness then slowly started progressing 1 km at a time. I reached 5 km within a month and only managed 42 minutes, but it didn’t matter to me, I was proud of the fact that I was able to complete the distance without being exhausted.

After a few months of doing it over and over again I decide to get adventurous and try for distance longer than 5km. This is where you learn the most about running. We would run a 8 km route but I quickly noticed that the route wasn’t so straightforward as the 5 km one I had been training in. The elevation you run on begins to change at certain points and you would need to adjust for that.

You would have slightly inclined straights but you needed to preserve your energy because there were long uphills requiring you to use your thigh muscles more than your calves to power yourself forward.  You'd reach the end of the uphill and would need to slow yourself down so that you don’t overspend your energy and be able to reach the finish line.

I remember when my sister got her race map and she began planning for the race; she knew what she was going to be up against and planned accordingly.  In the weeks leading up to the race she focused on the areas of her running she felt would be needed.

 Let's imagine for a minute our trading is like a marathon, the energy we spend is the capital we risk and the route we run is the market conditions we face. If we overdo too much we lose all our capital, if we don’t adjust our trading strategy to accommodate market conditions we face a serious problem of using the wrong methods in the wrong environment.

Take a good example of the public holidays we’ve just had over the last 3 weeks. The lack of volumes together with the stop and start motions made it extremely difficult to trade with not much direction. It gets to a point when you feel frustrated and eventually force the trade.

Now imagine that scenario in a 50 km race, you hit the 25 km mark and you just about feel fed up and decide the rest of the way you’ll just run your heart and soul out and it’ll get you to the end. Unfortunately it will be short lived. If you fail to plan, you are planning to fail.

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Most of us start trading with the idea of finishing the comrade’s marathon in gold medal positions. I’m sure most of you will agree that would be a great achievement but in reality it’s not attainable. The game of trading is not about how rich you get quickly but more so accumulating over a longer period of time.

The truth is most traders never make it to the finish line, they’ve either spent all their energy or they just couldn’t master the realities of a changing market. If you want to make it to be a consistent trader, you have to plan your race, know every bend and uphill you going to face and lastly having the control to keep your mind in check because without it that finish line just gets further and further away.

The New York Stock Exchange through the lens

1867

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1893

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1910

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1929

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1950

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1985

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2001

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2005

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2008

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2011

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2014

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2016

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Travelling Technicals with Global Indices: JSE Top 40

Today's technical analysis focuses on a stock market that's prevalent in Africa and plays a pivotal role in developing a positive image for the rest of the nations on the continent by showcasing the wealth of opportunities that lie in lands that have struggled to garner long term capital inflows due to an unfavourable investment climate or lack of mechanisms needed for the process to take place. 

The Johannesburg Stock Exchange began its life when gold was discovered in the then region of Transvaal, more specifically Johannesburg. Prospectors needed capital to fund their mining explorations and productions which shifted the demand for high levels of capital upwards prompting a public stock exchange to be formed to provide the necessary funding. 

At present the exchange is the biggest in Africa and lists a number of big name global companies that hold close to the heart of South Africa having formed their origins in the country. Some companies people might be familiar with are SABMiller, Anglo American and Sasol having all had listing on the JSE before going abroad and placing their primary listings overseas.

This is partially the reason why the JSE Top 40 and the JSE All Share Index has seen a fabulous run as these companies report earnings in a foreign currency such as US Dollars or Euros. Couple this with a weak Rand and valuations soar at a blistering rate. 

Let's get to the charts:

Monthly

The long term uptrend remains intact for now with the past years price action best described as lethargic. The momentum which drove the index up seems to have lost it's steam support and resistance of 42 000 and 49 000 holding each side back respectively. Not much upside action has taken place however the downside has produced some interesting patterns. 

I've highlighted with an orange rectangle the long tails that price action exhibits when a selloff is experienced. A handful of candles each attempted to break downwards with much vigour but were met with strong retort from the bulls leaving an element of bounce about the move. 

On the RSI, a momentum indicator, I noticed the neatness of the indicator to hold above the 50 mark. This would imply that the upside momentum has sustained itself well however there's been three points where its tested that mark and bounce up strongly. If we were to see a deciding break on this indicator I think it could suggest the end of this trend. 

Having said that the trend has been in place for a number of years and is becoming vulnerable to wild movements being experienced in world markets. Either way the resolution of this sideway price pattern will yield a significant move in both directions. 

Weekly

The weekly shows the same sideway pattern with important moving averages placed on top namely the 50 SMA and the 200 SMA. Price has zig-zagged through the 50 SMA in a to and fro motion. I also noticed it provided a degree of polarity. When above it rallied to the resistance and when below dropped to the support. Take note of the 200 SMA which is slowly gaining ground on the price with the difference between the two narrowing to levels last seen in 2011. 

Price has found itself stuck between both moving average and it would be best to wait until it lies above or beneath both to establish a direction. Until then we'll continue to see lethargic movement which highlights the importance of a need for a break for directional traders.  

Saudi Arabia stands by its tough talk with no involvement from Iran

Oil producers were unable to agree on a deal in Doha that could've seen the production of the commodity frozen for a set period in an effort to lift prices that have traded near 12 year lows. The oil summit was called after Saudi Arabia along with Russia, Qatar and Venezuela proposed to freeze their production on condition that other producers including that of Non-Opec nations, did the same. This prerequisite came from the insistence of Saudi Arabia who's been at loggerheads with neighbours Iran who refuse to follow such a plan.

In an interview with Bloomberg last week, deputy crown prince of Saudi Arabia, Mohammed bin Salman Al Saud stated that the country wasn't willing to strike a deal without the involvement of Iran and should a deal not be agreed too the oil rich kingdom could immediately raise production to over 11.5 million barrels per day which would add even MORE supply to an oversupplied market.

As much spin as Tehran tries to put on the reasoning for their absence no doubt has been left that the real intention behind the nonattendance was to test Riyadh's threats of turning its back on a deal should their conditions not be met which is now clearly known.

But as much as Saudi has stood by what its said it does also paint a grim scenario for the price of Black Gold should they move ahead with plans to expand production aimed at crippling other producers and stamping their authority on the dominance of oil supply. Mohammed bin Salman was in an retortive mood when he hinted that his nation could increase production too as much as 20 million barrels per day if it invested considerable capital into the oil industry.

Oil slips on failed Doha deal https://t.co/5W9iV5c1ir pic.twitter.com/xmOxvgSJot

— RT (@RT_com) April 18, 2016

One thing is for certain and that is Saudi Arabia may have become alarmed by the emerging trend of bleeding foreign reserves to cushion the blow from lower oil prices however their stash hasn't been so badly affected that it causes those in charge to lie awake at night just thinking about it.

Iran is at a distinct disadvantage here while only having just been released from the shackles of sanctions from the international community. They'd need to see a higher oil price to benefit properly from the sale of their produce to be certain of repairing the economic damage caused through the years of non-inclusion in world trade.

But Saudi Arabia could suffer much more over the long term by making their allies believe that their interest in OPEC lies not in the common good of all members but rather on their own self-centred needs. In protecting their market share, Riyadh is showing the world that it's not willing to compromise its own dominance while asking others to do so with dire consequences attached to the lack of following instructions.

In the age of globalisation, world trade has grown stronger and ties between nation don't only depend on economic coordination as had been the case for many years. Money talks and so it walks when the deal no longer makes sense for both parties. Saudi's bullyboy tactics might stab at the short term benefits that could've been captured if Iran's detachment from the deal was overlook but the longer term implication hold a shaky ground for those who now see Saudi's dictatorial rule over OPEC as oppressive to economic prosperity.    

This chart shows that #Opec’s days as econ force are over. Group is unable to reverse current slump in crude prices. pic.twitter.com/9iDCYuU82d

— Holger Zschaepitz (@Schuldensuehner) April 18, 2016

Why Europe will remain in a Secular Bear market

Europe may sometimes be regarded as a place of significantly less risk compared to other countries around the globe but they certainly aren't immune from policy mismatch that's failed to produced handsome returns in their equity market and sent the trade bloc into a spiralling downfall that could decouple the aspirations of past leaders.

The chart below highlights that exactly a year ago the Euro Stoxx 600 set the stage for an anticipated escape from a long and drawn out sideways range that had been building in the index since the late 90's and had been the frustration of European fund managers staking their bets on seeing the benefits of a united Europe translate into real economic growth.

However situations where strong support or resistance is approached on longer term charts, market participants suddenly become all too aware of the dangers of raising their hopes too high when speculating the distance that might surpass if a break were to occur. Perhaps its stage fright or a case of being so technically minded in their analysis that the onlook of uncharted territory gets the better of their speculative nature and makes them withdraw from the market, leaving a vacuum of emptiness to support any potential move upwards.

As fate would have it, scandals begun to float merrily into the scene and brought an abrupt halt to a lengthy rally that had been in existence from the lows of the Financial Crisis. The perfect concoction of bad news stirred in with uncertain future pathways regarding economic rhetoric being fed to voters and citizens alike in a bid to save political positions. Markets never lie and they were sure to let these political contortionists know of their true feelings in delaying the process.

Then who could forget the Volkswagen emission scandal that rocked the automotive industry to the core. A flagship company that represented the culture or norm to be expected from European products, that hailed from the one country in the Eurozone where investors found some comfort in knowing that their presence in finding a long lasting solution in the debt crisis debate was being led with a good dose of continuity in mind. But even they managed to slip up.      

A year ago today, European equities hit record highs. They didn't last https://t.co/AwwA5hZEoL pic.twitter.com/l8FfYjyNtO

— Bloomberg (@business) April 15, 2016

The mess Europe finds itself in is not by chance, in fact its as a result of an attempt to find common ground in a community that shares different beliefs and ideologies, making it difficult to navigate through the impasses that frequently appear. The tension that hangs in the air between European leaders can no longer be hidden from the public eye as many of these leaders use the public platform to send out their negotiating terms.

Some would argue that European equities may have fallen foul of the extreme negative sentiment that's been building up since the onset of jitters over the suddenly up and down movements in Chinese equities that subsequently spread volatility throughout the entire global financial system. In fairness you could say that it's certainly drove down the optimism that was once found in global markets however we should not distract our view that the current stance being taken by European politicians of kicking the proverbial can down the road is sustainable to any degree.

Recent transcript leaks from a conversation between IMF officials provides all the proof necessary that the talks with Greece concerning the decision to release the next tranche of bailout funds is bound to be fraught with disagreement and heated arguments.

This comes at a time when the British public is set to go to the polls to vote whether to remain in the EU with public sentiment siding favourably with the "No" vote. Europe cannot afford to lose Britain's membership as it plays a vital role within the trade bloc with grave economic consequences if voters decided to leave.

If Europe can't get over dealing with the debt dilemma it finds itself in then the seemingly never ending saga will push the European Union closer to the brink of collapse. The latest news that the IMF is wanting more participation by European governments in providing the debt relief necessary to Greece is the start of another eerie moment in EU history which could possibly change the course of the trade bloc forever.

EU governments refusal to submit further to IMF demands would be seen in a negative light when it comes to the voters in the UK and could prove to be the tipping point that unhinges the long standing partnerships created over the years amongst nations. Now is the time for Europe to act decisively or else the chance to do so may never occur again.

In saying this, there's no doubt in many people's mind that the stagnative state that the EU sits in only serves to draw more pessimism over the confidence of European leaders ability to reach a conclusive agreement that would see the EU remain an economic super power.  

#IMF says #Greece's debt figures don’t add up https://t.co/I9VJNLYTeP via @annaedwardsnews @GuyJohnsonTV pic.twitter.com/PQ73snNBHR

— Zoe Schneeweiss (@ZSchneeweiss) April 15, 2016

The 3 players that matter the most in Doha oil talks

With three days left to go to the start of the much anticipated oil summit set to take place between OPEC and Non-OPEC producing nations held in Doha, most market participants remain skeptical that a long term positive outcome can be found when leaders sit down to discuss a possible oil production freeze.

I've been following the story since the middle of last year and have stated a number of times that a resolution to this matter will only be found when the biggest producers are the ones at the tail end of the economic damage which has slowly materialised. Up until a few months ago Saudi Arabia had remained steadfast in its decision to rid the market of alternative producers in the US by flooding the market with barrels of oil.

This initially worked with US shale producers feeling the pinch and responding almost immediately with closures of wells that couldn't break even as well as preparing for a financial storm that had been brewing over the levels of debt created in starting up these new ventures. However it didn't stop these producers from exploiting the richest wells with quantity aplenty to help them extend their stay in the oil market a little while longer and become a frustration to the Saudi's.

Added to this a new problem was slowly starting to emerge within the context of the entire world economy where the growth needed to stoke the coals of  the economic engine were found wanting with both the US and China letting up far more than would be necessary to nudge things forward.

Double whammy...

Having heard cries of help from other minor producers in OPEC, Saudi merely let those calls fall on deaf ears as they proceeded on but its placed them in a vulnerable position within the oil producing community. Saudi's efforts to curb its ill gotten plans that have backfired and put not only their well-being at jeopardy but the entire membership of OPEC, leaving them open to harsh reactions from those it failed to listen to.

This can't be a good footing to stand on when negotiating the stability of oil prices let alone a steady and consistent relationship amongst its peers in OPEC where co-operation from each party is an absolute necessity which is what we find with fellow member Iran.      

When #OPEC & non-OPEC oil meet this weekend, it will be one of the most closely watched #oilsummit in yrs. https://t.co/oAhA3Z0nJu #giforum

— Gulf Intelligence (@gulf_intel) April 11, 2016

Iran's readmission into the oil market has dampened the outlook for the supposed Black Gold as the inventory of barrels stockpiled in Tehran is bound to be sold off to help aid an economy that's been economically isolated for a number of years.

However the relationship between Tehran and Riyadh hasn't been favourable at the best of times and the recent announcement by Saudi proposing a production freeze was met with a cold tone of defiance when Iran's oil minister was quizzed whether his country would be participating in such agreement. Tehran  had explicitly stated its objection to such a proposal before Saudi gave details of a possible way of halting the oil glut.

Sensing that Tehran could drag its heels, Saudi decided to find a better suited candidate that would give an extra notch of credibility to its plans to slow down the rate of oil production worldwide. Russia currently produces 10.9 million barrels per day marginally outstripping that of Saudi Arabia who is currently on 10.6 million bpd. Merging a plan together with both these players does add a degree of a no nonsense approach to the proposal but does it have the staying power to convince others?

Russia tactically got involved as it sees itself becoming a more prominent player in the oil market, possibly suggesting why the annexation of Crimea proved to be a hasty decision taken by Russian President Vladimir Putin. It's also got in on an oil deal with China that OPEC had hoped would've been swung its way but was beaten to the chase having devoting its attention to the oil price wars with the US.

But we should not forget that Russia's own economy has been crippled by the sanctions imposed on it from the West following the annexation of Crimea. Oil plays a significant role in providing much needed income in rebuilding the Russian economy and if Putin's ambitions are anything to go by don't expect anything less than astounding.

#Iran #oil production rises to fresh 4-year high of 3.3m b/d (up 300kbd from January) as nuclear sanctions lifted pic.twitter.com/kfBpXaGfZ3

— Javier Blas (@JavierBlas2) April 14, 2016

Since Saudi Arabia is seen as the leader of OPEC and possibly oil producers, their choice in strategy to freeze production as opposed to cut production was taken because they feels vulnerable of losing this status if it fails to play their cards properly which could see a hugely influential West losing its grip on oil supply since Washington and Riyadh hold close ties that sees a cordial understanding in keeping oil prices and production steady.

It's not a hidden secret that Iran has suffered from the economic sanctions imposed on it by the US and its dissatisfaction at the way Saudi Arabia has handled threats of new entrants to the oil market. Iran has capacity capable of meeting that of Saudi which would almost diminish the relevance of the latter should they chose to cut back production.

Russia on the other hand sees its ambition to play a more influential role on world politics as a priority with oil being strategic to this goal. It wouldn't miss an opportunity to circle a "wounded animal" so as to say when they see the pressure Saudi has come under in the waking months. Putin is too much of a political manoeuvrist to pass up such a chance to take power away from a controlling nation.

It's because of the above scenarios that I don't see the likelihood of a oil production freeze having an major impact on prices over the long term. The market remains critical and with profit margins being squeezed and debt hanging over the heads of management any significant jump in the price would yield an immediate flurry of selling from producers, pushing back the price from whence it came.

What Peabody Energy's filing for bankruptcy says for the future of coal?

The unprecedented comeback from world currencies and in particular emerging markets against the rampant strength of the US Dollar since the beginning of the year has laid the foundation for one of the biggest commodities price rallies since the end of the Financial Crisis. Together with a slight uptick in demand coming out of China, commodity prices have moved powerfully ahead to gain back lost ground after last years dismal performance.

But it's not with fading concern as the problematic debt crisis most producers find themselves in remains the bedrock of uncertainty amongst producers. We witnessed mining conglomerate Glencore becoming the bearer of bad news (or rather doomsday prophets) when they presented to shareholders a restructuring plan to cut down debt from abnormally high levels due to an inability to pay it back when considering the outlook of the mining sector.

This was followed by Anglo American Plc, BHP Billiton, Rio Tinto and the likes all conceding to the output glut they had created in expecting resilient demand to stem from China that had fallen flat after a hard economic landing that still persists.

Although these bigger mining players may have weathered the storm at the height of its compounding panic, it was only a matter of time before we saw casualties submit to the often cruel aftermath of such an event. Yesterday's announcement that the world's biggest private coal producer, Peabody Energy Corp. had filed for voluntary bankruptcy drew a gasp of shock yet an expectant understanding that the inevitable that had been priced into most commodity producers had finally marked its presence in the sector.

Filing for voluntary bankruptcy, Peabody Energy might be able to preserve a company that's been in existence since 1883 but will need to re-think their pathway going forward as a result of an increasing competitive coal producing environment resulting in lower margins as well as a shift away from dirty energy to cleaner fuels.    

BREAKING: Peabody, world's largest privately owned #coal producer, files for bankruptcy! https://t.co/mC9ccCDGQh pic.twitter.com/UvxaTIxXJn

— Greenpeace (@Greenpeace) April 13, 2016

Most major commodities have experienced the same fate but coal has had the toughest out of all of them given the dual purposes it has in the production of other key products namely electricity and steel output. Both of these products are vital in providing a stable and concrete economy to grow from but an aspect that's been missing from the largest consuming nations of these products.

The US under the Obama administration has gone on a tireless drive to make the public aware of the harmful effects pollution has on the environment and in doing so has tightened the regulations for coal producers by implementing policy that require them to emit less emissions and providing tax breaks for suppliers of cleaner energy.

In China the demand for steel has dropped dramatically as government attempts to transition the economy from production oriented to consumer driven. This has had a profound impact on the price of metallurgical coal which is used in producing steel, another area of the sector that's been confronted with overcapacity and a gluttony of supply.

It's important to note that Peabody Energy had invested $5.1 billion into an Australian metallurgical coal mining company that's spelled the beginning of their disastrous performance following the declines in prices.  The company has indebted itself at a time when most in the industry had expected more on offer but got a lemon instead, however had the company been more diversified in its products perhaps it would've stood a better chance of survival as has been the case with the larger miners.

The company is a distinct player in the global coal production equation which begs the question over what the state of play might be for the commodity in the future. If the largest privately owned producer of coal is unable to steer things in the right direction, who has a chance to?

Indeed the price has a huge impact on profitability but the regulatory environment isn't going to fade away too quickly, especially after this event which would be considered a victory in the quest for cleaner energy. Government's around the world are increasing the momentum behind a global effort to curb carbon emission adding to the woes of these producers and making it harder for them to cream the profits that once were able to in the past.

Possible scenarios may take shape in the months ahead but I expect these bigger players to be swallowed up by the diversified producers whilst the smaller producers trickling out the market. What the industry needs now is a reinvention of itself with specific focus on other forms of energy besides coal. The future for energy lies in the way that consumes the least from non-renewable resources and aims at stretching the output of those renewables such as solar and wind to its fullest potential.

Travelling Technicals with Global Indices: PSI 20

Today I'll be focusing on a relatively smaller player in the European network of stock exchanges but whose political environment plays an important part of the direction of the Eurozone. Portugal has a population of just over 10 million yet its influences are still felt strongly around the world after its dominating participation of the discovery of new lands which led them to find strategic trade routes to nations such as India, Brazil and South Africa.

A brief history of Portugal

Although sovereignty has been restored to all the countries it colonized including Macau, the country has gone through its own testing times in trying to find social order that started in the year 1910. The gradual build up of socialist thought from the beginning eventually led to installment of Antonio de Oliveira Salazar who sat at the helm as Prime Minister for 36 years until his death followed by the collapse of his regime, Estado Novo in 1974 in a military coup.

The country began to pick up the pieces as best as it could but suffered along the way but saw a ray of light in the late 70's when they started negotiations to join the European Economic Community which became the EU in later years. Since then the country has followed socialist ideals but in recent years has found itself in a difficult position of implementing austerity measures to pay down debt and serving the needs of the people who have become accustomed to this way of living.

It's due to this fact that the Portuguese economy has suffered further setbacks as they fall into the category of member nations within the EU that need to be bailed out on a consistent basis, pushing politicians into a corner by promising one thing to voters and doing another for creditors thus creating a large degree of political uncertainty.

We saw in recent months how parliament was unable to form a government with at least 50% of the vote, causing much distress over whether it would be found in quick enough time to resolve the uncertainty that could hold the country back further and possibly hinder the pathway to bearing the fruit of economic prosperity again.

Let's see how well the performance of the PSI has matched up to these events that's taken place;

Monthly

The index exhibits a much harsher depressive state than most other European indices that attempted to reach Pre-Financial Crisis highs. The all time high of 13 500 was reached during 2007 but failed in its resurgence by only touching 8 000 on its return trip and subsequently falling down past the lows made in 2008. These new lows formed critical support for the index that has been stuck in a directionless basis for the past four years.

In trying to find distinct technical formations that would help indicate to me of possible movements, I battled to find anything out of the ordinary however I did revert back to basics and placed support and resistance lines to find the sideway motive. I would say the crucial line at present lies at 4 500 with a break downward suggesting fresh lows that could be registered in the future.

I've drawn an arrow where I focused my attention on the chart thinking I would find something here by just observing the highs and lows. In order to unlock chart value we have to zoom into the lower timeframe charts and unpack the price action which I'll explore in the next chart.

Weekly

It must be noted that the Portugal Stock Exchange is not very big with few listings (57) making the charts untidy. My belief is the neater the chart that lines up to the pattern or formation the greater the edge produced. 

In saying this it appears that the weekly chart has generated two possible technical patterns that measure up similar targets to the downside. Again, the break has been untidy so we'll need to monitor certain levels for confirmation of a void signal which I'd place at 5 600. The break was securely confirmed with a long red candle penetrating through support however in frustrating fashion the price has moved back above the support line again but having tested the downtrend, failed and subsequently come back down to the support. 

This price action suggests that the movement to the target, if it does materialise, could be messy and would require a considerable amount of patience. The added volatility being experienced in global markets doesn't make things easier for this one so in concluding I would say stay away.   

Interest in Yahoo's assets grow with bidding deadline extended

As the deadline draws closer for bidders to put in their proposals to Yahoo's executive over potential selloff of the internet giant's assets, more interested parties are coming out the woodwork and creating a matrix of opportunities that's sparking good media attention towards the tech company who hasn't been lucky over the past few years following management's restructuring plan gone wrong.

The latest developments sees a potential offer from the UK's owner of the Daily Mail which is perking up the level of interest around the sale of highly sort after assets. A few other companies that's been named as potential suitors are Microsoft, Google, Time Media and the lead bidder Verizon to name but a few.

Yahoo's management decision to extend the bidding deadline till the 18th April 2016 seems to have worked after today's news of the Daily Mail's interest adding speculation that a bidding war may ensue which would ultimately generate more cash flows for an ailing Yahoo.

Having briefly mentioned the company's run of bad luck recently it would be best to note that CEO Marissa Mayer hasn't succeeded in her quest to turn the firm into a lean, mean search engine machine that was initially flaunted at the onset of her tenure. Part of the reason for the company's poor performance was her inability to get the company's staff on her side after a shakeup in company processes and flexibility led many employees to believe Mayer wasn't being true by subsequently side stepping those same rules in her own capacity.

This after Mayer who had returned to work two weeks after giving birth built a nursery for the new additions to her family next to her office whilst cancelling flexi hours as well as working from home to cater for new mothers.

@Yahoo extends initial bid period for potential buyers till April 18, follows reports Verizon & Google planning bids https://t.co/JOaqZf0uym

— Marie-Michele Caron (@mariemichelecar) April 8, 2016

Mayer, who's a former Google employee herself, wouldn't be ignorant of the way tech companies are setup with the work space for staff playing a pivotal role in the success of the company. Having a company that's constantly pushing the boundaries of technological innovation coupled together with intellectual minds requires a hard grind to compete against impressive opponents in the field of I.T but at the same time creates a need for a harmonious working environment to stimulate the creation of new ideas, an event most tech companies have experienced.

Separating management's need to follow the rules away from that of a common staff member placed the company in a precarious position by implying an "us and them" attitude that has formed a resistance against further changes that are vital for the success of their plans.

But then considering the number and quality of companies coming forward with bid proposals, one starts to wonder if Mayer and her management team were the best selection to turnaround the company. The range of opportunities emerging from the bid process is spectacular yet Yahoo wasn't able to take advantage of that with possible partnership deals?

What this highlights is not an efficiency problem with assets but rather a shortfall of management's ability to adapt to a constantly changing business environment. Who know's if Yahoo may have become a decent competitor to global tech giant Google, but one thing is for certain, breaking up the assets won't solve the dilemma for Yahoo but it will open up synergies that will open the gateway to new business model thinking within the context of the IT sector.