May Take On It All – August

It’s been a while since I have updated everyone on everything from this side of the desk and we seem to be as settled in the new office as we possibly can be given everything the market has thrown at us this year. Given the amount of time that has passed since I last updated everyone, I thought I would provide my view on the current state of play along with outlining some of the things we have been doing and what is currently in play along with some ideas going forward.

With the issues in Greece dominating the early part of the northern hemisphere summer it now seems to have stopped making the headlines of every media outlet available.  This has seen the Euro trade in a range between 1.0500 to 1.1500 against the USD.  European equity markets took the news badly on any negative news but were also very quick to rebound on any sign of an agreement or turnaround in the market. The sell offs provided good buying opportunities and we did so by purchasing some DAX calls through issued trade alerts. All trades that have been recently executed can be seen in the Performance Report that can be downloaded through the Performance Page.

Post Greece, the market then shifted its focus to China and the Federal Reserve in the US. The swings on a daily basis on the Chinese equity markets were significant to say the least but this was to be expected given the massive run up we had seen – 69.84% gain from the lows made in February this year alone!

In the US all eyes are on the September FOMC meeting in anticipation of a possible rise in interest rates. We have seen the USD strengthen against most currencies, combined with commodity prices, QE in Japan and Europe all pointing to more strength in the USD. The big question remains as to how far can this go? If we look at the Australian dollar, we have weaker commodities, slowing demand in China and the RBA still on an easing bias so holidays in the US don’t look like they are going to get any cheaper any time soon. The AUDUSD in on course to touch 70 cents this year in my opinion. On the holiday front the only positive is the lower crude oil prices which is benefiting the airlines but doesn’t quite seem to have made its way to the petrol pump for our benefit. Fuel Prices are higher now that when oil was trading around $100/barrel! – explain to me how this works?!

Looking forward I still have a preference for US equities over domestic equities but having said that, we have done quite well locally but better offshore. Stocks such as CSL have pushed to new highs, The banks have been steady and the miners have been hammered. I have been issuing investment recommendations on the ASX200 and we have simply been buying dips in the index. To date we are doing well with this strategy as you can see in the Performance Report on the Performance Page. Timing has been everything but my core view remains that we should perform better in the second half of the year as compared to the first half. With regard to the US we have also been on the right side of the currency move so not only has it been a case of calling the direction of the equity markets but the currency gains have also improved the returns.

From here, I continue to favour health care, technology, pharmaceuticals, biotechnology, banks and solid trending stocks which continue to deliver. The most notable example being Walt Disney in the US up until the overnight movements. Stock down circa 10%.

I will look to put a note out, post the close of each month with an update. Please use this as an opportunity to ask any questions you might have.

LP

Covered Call Premium – October 2014

Below is a link to the yields achievable on a monthly basis through a Covered Call Writing Strategy:

Dow Jones October 2014 Covered Calls

If you have any questions please contact Pilkington Trading.

The current annualised return on this strategy is 19.74%.

Please enquire about current performance spreadsheets if you are interested.

Market Update – 11th September 2014

Below is a brief rundown of the currency and equity markets and Pilkington Trading’s views.

Currency markets.

Strong USD to remain

Europe and in particular Germany is showing some real signs of weakness and if ECB goes down the QE path it could be a prolonged period of weakness for the Euro.

Scottish referendum weighing in on the GBP along with the weakness across Europe. Volatility is back to more normal levels above 10%.

AUD and NZD are being hurt by weaker commodity prices and a prolonged outlook for lower interest rates on home soil.

EURCHF – Concern is growing that the peg at 1.2000 will give way which will create a lot more volatility if that is the case.

The FOMC meeting next week could really paint a picture for a stronger USD so possibly more weakness in the AUD.

The ECB is not meeting until Oct 2^nd

 

Equity Markets

All eyes on Alibaba’s public listing next week with talk it will come in at between $60-$66 per share for a value of about $20+ billion.

AAPL is back in the news with its new product launches this week. First day of the announcement saw a volatile stock price ranging from $96.14 to $103.08 before looking to close only $0.37 below the previous close. After digesting the news and the company releasing its new products including the iPhone 6, iPhone 6+ and Apple Watch, investors liked what they saw and the stock saw a good bounce closing up 3.07% at $101.00. A move higher from here looks likely in our opinion.

Dow still remains the weakest of the 3 major indices in the US posting the smallest gains with +3% as opposed to +8% for the S&P500 and +9.8% for the Nasdaq YTD.  We are still firm believers that the technology trend will continue and favour exposures to the stocks listed on the Nasdaq Exchange.

Marketindex.com.au – Your destination for ASX data.

 

 

 

Luke Pilkington will be providing his ASX Analysis, Stock Tips and on occasions, a detailed Monthly Outlook report for the Market Index team. You can view all stock tips and market outlook reports via the ‘ASX Market Data’ menu on the Pilkington Trading website.

Pilkington Trading is happy to announce that it has teamed up with www.marketindex.com.au that brings you a comprehensive and complete website that covers ASX market data, analysis, opinion and statistics.

For all enquiries regarding the information posted, if you are interested in investing or would simply like to know more about Pilkington Trading, Luke Pilkington or BBY Limited, please contact us.

 

 

It’s time to build/begin that portfolio! 20.05.2014

Thought I would pen together a quick email to update you on where the markets are sitting, my views on what I believe will be happening and the stocks I have/looking to gain exposure in.

I believe we are starting to see the top of the market and a small pull back is upon us. The XJO has had two strong negative days and I think we should see the index head toward 5300 over the next month or so. I still believe we will see the markets rally from June onwards and this pull back will be a great opportunity to enter the markets with a view through to the years end and beyond. There is plenty of money sitting on the sidelines with massive fund managers and superannuation providers. There is talk that a shift from bonds (only returning 2.56% on 10 year US Treasury notes ) into the equity markets will bring a whole new wave of buying momentum. I have a target locally of the ASX200 reaching 6000 by the years end.

 

High yielding stocks are paying investors dividends upwards of 5-6% (TLS, WPL, NAB etc.) alone on local soil and some stocks in the US yielding upwards of 8% in strong, well performing companies such as Seadrill Ltd. (10.47%) and High yielding ETFs . I think it is a great time to look into getting into some safe, high yielding stocks that have a good management team behind them and are looking to grow. I especially like the look of Woolworths (WOW.asx) on the local market. The stock has broken the $37.00 level convincingly, come back and is looking to use this level as a support before we see a rally higher from these levels. Coinciding with the 50 day moving average, a key rising trend line and the stock bouncing from the 38.2 Fibonacci retracement, I think we will see a move higher from these levels.

 

These stocks will drive our market higher, return investors with great dividends and have a good chance of seeing capital growth in the medium to long term. It’s a great time to be looking to build on your current portfolio or begin to build one with the support of BBY Limited and myself. With access to the best local stock and sector research, 24/7 trading desk support and execution services, access to daily reports, market wraps and trade ideas, do yourself a favour and find out how we can structure a strategy to suit your investment style and risk appetite.

There are both the online (more do it yourself with access to most features) and full service broking options (complete full service broking option that allows you to build a strong portfolio with a hand to hold) available. For a conservative Covered Call writing or High Yielding option strategy that may suit your SMSF or personal trading goals with a long term outlook please ask as this is an area that is extremely important to remain in control of (Now that we are all going to work until we are 70!).

Please contact me if you are interested in knowing about the stocks both locally and internationally that I have invested in myself and have the majority of my clients gaining exposure in.

Clients, please feel free to ask me any questions you may have.

LP

Trending FX Service

I will be commencing my coverage of a Foreign Exchange trading strategy that is strictly rule driven from technical analysis and indicators. The strategy is based on the concept of what is known as ‘Parabolic Stop and Reverse’ which essentially is a trend based trading strategy.

I will be releasing a daily note of the Forex positions I currently hold and the stop loss levels that will be updated in the day on a daily basis based on the movements of the currency pair the night before.

The strategy has proven successful in the past through back testing. This strategy requires patience and the ability to stock to the rules! If you believe you can follow these two things, there is a good chance that you can see some decent returns.

This is a chart that the strategy is based off where we either get given ‘Buy’ or ‘Sell signals based on the red dots. If the dot is below the candle, we buy the currency and place our stop loss at the level of the red dot beneath it. On a daily basis the stop is moved to the dot below the corresponding candle. In this case we would buy AUDNZD and set our stop loss at the level of the red dot below the latest candle.

In foreign exchange profits and losses are calculated in points. Foreign exchange is has a margin rate of 1%, meaning that if you want exposure to $100,000 of a currency you will have to put aside $1,000 of margin in your trading account.

P/L e.g: If the AUDUSD moves from 0.9000 to 0.9010 for example, this is a move of 10 points and this would constitute a profit or loss of $100.00 on a $100,000 position.

These are my current positions and equivalent information if all trades were followed:

• AUD/USD (Daily) Latest 0.9033         LONG from 0.9113 on 18/03       Reversal point at 0.8963.
• 1045 points realised profit since 01/13 if all trades followed.

• EUR/USD (Daily) Latest 1.3778          SHORT from 1.3866 on 19/03     Reversal point at 1.3938.
• 294 points realised profit since 01/13 if all trades followed.

• EUR/JPY (4 hour) Latest 141.110       LONG from 141.760 on 20/03     Reversal point at 140.830.
• 3434 points realised profit since 01/13 if all trades followed.

• GBP/USD (Daily) Latest 1.6506          SHORT from 1.6597 on 12/03     Reversal point at 1.6666.
• 1326 points realised profit since 01/13 if all trades followed.

• USD/CAD (Daily) Latest 1.1243          LONG from 1.1118 on 10/03        Reversal point at 1.1098.
• 1110 points realised profit since 01/13 if all trades followed.

• USD/JPY (Daily) Latest 102.400         SHORT from 102.320 on 13/03    Reversal point at 102.590.
• 1095 points realised loss since 01/13 if all trades followed.

If all trades were followed from 01/2013 last year the total profit would be 6114 points.

If we held a $100,000 position in each of these pairs this would relate to a $61,140.00 profit.

Remember only $5,000 margin would be needed for this. I would recommend an account size of $20,000 to take up positions this size so we were able to ride the ups and downs of the currency market. Of course we could do this with $10,000 positions and the margin necessary would only be $500.00. I would recommend an account size of $2500 in this case.

Please contact me to look into establishing an account and following this strategy if you are interested.

LP

Why you’re missing out by not being in the markets! (Market update) 04.03.14

Thought I would send out a quick blast with a bit of market news and what I am currently looking at/actively trading at the moment.

We are seeing the markets pull off a little bit at the moment due to all the noise surrounding Russia and Ukraine. Markets don’t like uncertainty. We have seen gold rally because of this (currently at the $1350.00 level). This is just noise and I think the market is beginning to realise that a diplomatic resolution looks like the likely outcome. This is creating a few good short term buying opportunities along the likes of BHP, RIO, AMC, TLS, CWN and IRE.

I am still bullish for the months leading into May before I think we’ll see a sell off and then a strong run into the end of the year from the beginning of July. Sell in May and go away they say!

I am looking at Westpac at the moment for a possible trade throughout the months of March and April as these months have generally been strong for the company as well as the ASX200 index over the last 12 years:

 

In the US I have had my interests in the following stocks:

• Las Vegas Sands (LVS)
• Monsanto (MON)
• IBM (IBM)
• MasterCard (MA)
• Bed Bath and Beyond (BBBY) (As a seasonal March/April trade)

We have done well so far in these stocks and I think there is still room to run. Possibly a time to buy the dips!? As Warren Buffett is doing:

http://www.businessinsider.com.au/warren-buffett-speaks-on-cnbc-2014-3

Please let me know if you would like to look into any of the strategies I have currently in play for these stocks or wish to open an account to get exposure to the markets.

LP

Buying on the dips? 28.01.14

After a huge pullback last Friday night and another small fall in the American markets yesterday, it is no surprise our market is following suit (currently down 65 points on the XJO). The question is… What to look to buy on the market dip?

I personally think we will see some volatility in the markets over the next few months before seeing a strong rally for equities in the latter half of the year.

The two stocks that have strong support levels in place and seem to be respecting these levels at this point in time are Telstra Corporation (TLS.asx) and Fortescue Metals Group (FMG.asx).

We can see from a technically perspective that they are both looking for support at previous key levels, TLS – $5.10, FMG – $5.10 and I see this as an opportune time to buy the dip.

FMG has been range bound for the last 4 months and I believe we should see a bounce in both this stock and Telstra in the the next few trading sessions. I think this is a time in the market where we look to place opportune trades and wait for the market to regain its feet again before looking for a long term, relatively safe investment in preparation for a strong run in the second half of the year.

Telstra:

 

Fortescue Metals:

 

I would look for TLS to trade between the $5.00 and $5.15 levels and FMG to bounce to approximately $5.70 where key resistance is.

 

Shares as a Christmas Gift? 19.12.13

Have you ever thought about buying your loved ones/friends a parcel of shares for Christmas?

Investing in the stock market is a great way to build wealth over time. Records and history prove me correct in saying this. Purchasing a parcel of shares in a strong dividend paying company is a very sensible and thoughtful gift. Your view is not that it will make the beneficiary of this gift rich overnight but will gradually build wealth over time for them. Dividends can be paid semi-annually into a bank account or reinvested through a dividend reinvestment plan so that a ‘snowball effect’ takes effect and a greater return can be made over the years.

The Christmas Rally has begun! After the recent tapering decisions that have been made by the Federal Reserve in the US, markets have reacted extremely positively and the game has been changed. Money will pour into the markets from the sidelines now and we should see a prosperous 2014. I think we will see a pull back around March but then I think we will see smooth sailing through until next Christmas from July.

It may seem small or something that the person receiving the gift will look at and turn their nose at but when they are reaping the rewards of an investment that is yielding 5% and beating the banks they will thank you. Not to mention the capital growth over the years that a good company will produce.

Let me know if you are interested in this idea and I can help you facilitate this. Why not set up an online account so you can track the progress of the stock and its returns over the years?

Merry Christmas

 

Luke Pilkington.

P:03 8660 7260

E: ltp@bby.com.au

 

Conservative Income Strategy

This strategy is known as the Covered Call Writing strategy. It is an options strategy where an investor holds stock and writes/sells short term, out of the money call options on that same stock in order to generate a monthly income on their holding in flat, falling or slowly rising markets. Capital growth from your stock holdings will not occur in sideways trending or falling markets and with this strategy we try and capitalise on this by generating income by receiving a premium for selling the calls.

Example: BHP trading at $30.00

We buy 100 BHP shares at $30.00 = outlay of $3000

We sell 1 NOV 2013 32.00 CALL = premium of $0.50 = $50. (1.66% on initial purchase)

The stock climbs to $31.00 by expiry and we get to keep the $0.50 premium and we gain $1.00 on the stock.

Total return on the investment is:

100 shares x $1.00 profit + $50 (premium received) = $150 for the month.

= Total return on $3000 investment of %5.00.

 

If the stock stays at $30.00, the stock position will not have made any profit, but we get to keep the $0.50 premium ($50.00) totaling a profit of $50.00 for the month. We still hold the stock and can repeat the process for December.

If the stock goes to $33.00 by expiry, we are capped at $32.50 (strike price + premium received) and we can no longer make any more from this position. We will then sell the stock for $32.00 and keep the $50, totaling $250 (8.3%) profit on the investment.

If the stock falls to $29.00, again, we keep the $50 for writing the call but our stock has lost $1.00 totaling a loss of $50 (-$100 + $50). This strategy has hedged our stock position and the loss on the stock is minimised. We still hold the stock and can repeat the process for December.

If we were to return this on a monthly basis (which we are hoping to do by implementing the covered call writing strategy), this would be an excellent outcome with a total return of 60% p.a. I know this is unreasonable, but with writing calls we can look to increase our monthly returns compared to if we just owned the stock. Even if the stock was to remain flat, we would still be returning 1.66% per month, equating to 19.92% for the year based on these figures.

Writing calls can also lessen the blow if the stock price was to fall away. If BHP lost $1.00 and went to $29.00, we would have effectively lost 3.33% on the investment in the month but writing the call and receiving the $50 premium for the sale, we have limited our loss to 50 cents theoretically, or in percentage terms 1.66%.

The downside to the strategy is that you sale price of the sale of your shares is effectively capped at the level of the sold call strike. You may be happy to sell the shares at this price or we can manage the position by rolling the call up a strike  adjust according to the market at the time.

This strategy is extremely effective in generating returns you wouldn’t have had in a neutral market and also slightly hedging against any losses that may occur.

For my more experienced clients I recommend a similar strategy that generates a greater return on outlay in terms of percentage through the use of deep in the money calls rather than stock.

Click here to find out more about the High Yielding Covered Call Strategy, and learn how to accelerate your returns through a similar strategy.