US Treasury yields make a 4 year high. I apply that to buy French and Spanish banks. Engineering services in Australia and Switzerland gets my eye. And Bitcoin gets pummeled from India.
Portfolio News
Interest Rates 10 Treasury yield in US made a 4 year high. The 30 year yield went over 3%. Inside one month, the 10 year rate has risen by 37 basis points (i.e., more than one rate hike)
You ain't seen nothing yet. I have long had the view that the market is under-estimating the combined forces of economic growth and rising employment on inflation. This next article offers me some support.
Bitcoin Price Collapses I am not a great fan of trying to point to a specific factor that drives a drop or rise in the Bitcoin price. What I do know that the problem gets a whole lot worse when there is SCARED money at play.
https://www.coindesk.com/2-month-low-bitcoin-price-drops-9k/
Today's story was about India when the Finance Minister talked about taking action on the use of "cryptocurrency for illegal activity". The scared money read this as being action on making cryptocurrency illegal. Later in the day the Ministry issued a statement of clarification - too late as the scared money had run. It did not help that Facebook announced that they would no longer allow ads for cryptocurrency and ICo's.
Bought
Banco Bilbao Vizcaya Argentaria, S.A (BBVA.MC): Spanish Bank. I was running stock screens and BBVA appeared on a Price to Earnings screen on the day that earnings were announced. Earnings were below expectations but price made a new one month high. What caught my attention was what the earnings were hiding. An important slice of the business is in Argentina. Non performing loans in Spain had improved. Spain reported surprisingly strong GDP numbers last month. Enough factors to get me interested. The chart tells a story of a strong rise from 2016 lows and price just breaking through the last highs.
It is the comparison to its core markets that made the trade setup for me. Price (black bars) has basically tracked the Spain market (representeted by the iShares Spain ETF (EWP - yellow line)) but has underperformed the Argentina market (represented by the Global X Funds Argentina ETF (ARGT - orange line)). (Note: I am holding both EWP and ARGT in my portfolios)
Société Générale S.A (GLE.PA): French Bank. Société Générale appeared on a Price to Book and Price to Sales screen. Price has been in a consolidation zone for all of 2017 and has been testing highs made in 2010, 2011, 2014, 2015 and 2016. I am expecting that with growing economy and rising European interest rates that it will break up.
I made two trades. I bought a parcel of stock. I also bought a December 2020 48/60 bull call spread. [Means: Bought strike 48 call options and sold strike 60 call options with the same expiry]. The net premium was €3.17 (6.6% of strike). Lets look at a chart. The chart shows the GFC and European Debt Crisis lows. Price has been in a big band between those lows and €48 for some time. I know that banking will never be the same as it was before the GFC - rules and psychology have changed that much. It is not hard to imagine that price could make back one third of the way to the GFC highs. I have marked in the sold call (60) as a red ray with the 278% maximum profit.
If I borrow an Elliot Correction wave from the 2012 lows (left hand zigzag) I can see maximum profit being hit well before the end of 2019. Hence buying a capped bull call spread (reducing premium) and the stock which gives full upside.
Alpiq Holding AG (ALPH.SW): Swiss Utility/Construction. I applied the stock screens to the Swiss market and found this stock on all three screens (Price to Book, Price to Sales and Price Earnings). The business is involved in the electricity energy industry more broadly - i.e., running and building power stations and providing energy related services across Europe. The chart shows that price has made a new high. Will it ever get back to all time highs? I doubt it as the financials are less than robust - margins have been declining; revenues are flat. Debt to equity is mid range and will provide pressure when Swiss interest rates rise (which they are not - I know as my shorts on Swiss rates are looking sad for now). Why make the trade? Economic growth will fix the top line is my thinking. There is a lot of blue sky on the chart from those lows
Downer EDI (DOW.AX): Australian Mining Services. Signal came in form the research house to add Downer. Downer operates in a wider range of infrastructure and mining services than other holdings in my portfolio. The chart shows a compression of price into a triangle. Trade is looking for price to break up out of the compression zone. Downer's price to earnings ratio is appreciably lower than other in its sector. With a return to mining growth and solid government infrastructure spending, this multiple gap should close
Cryptocurency
Bitcoin (BTCUSD): Price range for the day was $1732 (17% of the high) - more than double a normal trading range. So much for my hoping to see price make 4 higher highs on a 1 hour chart - it could not make it to two. I made two attempts to catch consolidations - one at $9500 and one at $9038. Price tested as low as $8,500. My liquidation price at Bitmex is $7831 - 10% below the tested lows.
The chart shows that price dropped through December 2017 lows. Next support level is the November lows at $7,766 which is below my liquidation level. I am not going to add any more positions - time to let this run and fail if it wants to.
I did sell Bitcoin to buy NEO in my Bittrex account.
NEO Added to my NEO holdings by selling some Bitcoin and consolidated them on Kucoin exchange. NEO is a mineable coin based on Proof of Stake. I had been looking at installing my own wallet and starting to stake my coins when I found that Kucoin stakes NEO for holders. I had previously bought NEO on Bittrex and was holding them there. Slightly messy process as Bittrex only allows transfers of whole coins - so I had to make up enough NEO to make a round number plus the transfer fee. Took me two goes.
KucoinShares (KCS): I discovered in my Kucoin account that I had been allocated a bunch of coins right across the spectrum of what Kucoin trades. Did some digging to find that they allocate 50% of the trading commissions of the coins traded to holders of KCS coins. I was holding spare Ethereum in the account to fund future coin purchases - better idea then is to sell the Ethereum for KCS and garner more free coins. I can always sell the KCS later if I need to.
Currency Trades
Forex Robot closed 4 trades (0.18% profit) and is trading at a negative equity level of 8.7% (higher than prior day's 8.6%).
Outsourced MAM account I run an outsourced forex trading account with Actions to Wealth. They closed out 9 trades for 0.24% profits for the day.
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Bloomberg and Marketwatch and Coindesk and Google Search. All other images are created using my various trading and charting platforms. They are all my own work
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers
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February 1, 2018