tradersams blog

Continuing the paper trade on BHP from this post.  Entered yesterday a short position at $32.15 (notionally).

bhp 8-7-09

The price dipped today in line with the general market, but then recovered better than many others.  The price seems to have bounced from the support (arrows), and will continue to watch to see if this holds.

Current conditions are: Stop Loss at $33.68, target $27 (earlier support).

BHP is a large company on the ASX so will also keep an eye on the All Ordinaries (xao) as they appear highly correlated since early March this year.

Review of other stocks in the market tonight has shown me a number with long tails, demonstrating bearish rejection later in the session.  If this continues into tomorrow, this may well be a brief trade!

all ords today

Looking at todays All Ordinaries bearish rejection is clearly seen, although in the medium term the outlook is still bearish.  As always I whould wait for a confirmation before entering a long position.

A number of my other shares that I follow lately also exhibited bearish rejection, and are on or near lines of support.

S0 – How to trade the position in reality? I contacted my broker (Commonwealth Securities) and despite short trading being allowable on the ASX, they are currently not offering it yet (no explanation given).  This leaves me with OTC CFDs, ASX CFDs, options and warrants.

Over the last year I have found that warrants are a reasonable instrument for small positions – but only with some providers. With a long dated warrant I get the benefits of a CFD without the margin calls – but watch out for the barrier!   Some of the providers seem to remove the buy/sell positions at times of high volatility, so I avoid those companies.

Options are also a good instrument, but I have found I only really get a good price if I have time during the day to manage the entry – which given my day job rarely happens.

So for the purposes of simulation, I am going with a long dated warrant – say BHPXOQ.

To be continued…