Chinese New Year: Three Cases For CFD Trading February 6, 2024

Chinese New Year: Three Cases For CFD Trading

The Chinese New Year is a festive season may be celebrated by some parts of the world, but the trading cycle during this period is not different in the other parts of the world. As families come together to celebrate, markets often experience unique trends and shifts, influenced by this global festivity. From increased consumer spending to shifts in market sentiments, the Chinese New Year opens the door to distinct trading patterns, making it a pivotal time for both traders and investors.

At the end of this article, I will share with you some trading opportunities and a free indicator I have developed, to help plan your trades more effectively. These insights and tools are designed to empower you to navigate the festive market with confidence and make the most of the opportunities that the Chinese New Year brings.

Before we dive in, let’s revisit our article from a year ago, where we outlined our trade plans.

We were bullish on China A50, bearish on USDCNH, and bullish on Gold. Given that China A50 and USDCNH are negatively correlated, our predictions for China A50 and subsequently for USDCNH did not pan out as expected. However, our outlook on Gold did materialise, with it reaching a peak of 2236.6 on 7 March 2022.

Effective trade planning often leads to higher profitability, as you would be more careful to only take trades that align with your strategy.
With this in mind, let’s explore potential trading opportunities this Chinese New Year. As we aim to capitalise on short-term market fluctuations, we recommend using Contracts for Difference (CFD), a financial instrument that is well-suited for short-term trading.


Hengan International CFD

Hengan International Group Co., Ltd. specialises in the trading of personal hygienic products including sanitary napkins, disposable diapers, and tissue paper products.

Chinese New Year: Three Cases For CFD TradingSource: Phillip CFD


If you believe that the Chinese markets have reached their lowest point and are poised for a lift-off during the festive season, then Hengan International might be a company worth considering.

As a trader who prefers to follow the trend, I would approach this trade with caution.
With strict expectations, I’d like to see prices unfold as follows:

Chinese New Year: Three Cases For CFD TradingSource: Tradingview.com


I typically prefer to see prices break above and then retrace to the red line before I consider entering a trade. This approach helps in identifying a potential entry point with a more favourable risk-reward ratio.


Sheng Siong CFD

Chinese New Year: Three Cases For CFD TradingSource: FreePik


A popular destination for Chinese New Year shopping is Sheng Siong, known for its supermarket supplies and operations. As we approach the Chinese New Year, locals will be purchasing festive goodies. With Sheng Siong’s earnings report due in mid-February, there may be an opportunity for prices to move up this season.

Chinese New Year: Three Cases For CFD TradingSource: Phillip CFD


As of mid-January, Sheng Siong is on an uptrend with key levels at S$1.55 and within rectangle where the price low is at S$1.47. Traders can consider these 2 price points as they go about planning their trades. Given that this trade is seen as a short-term opportunity, lasting at most 2 months, trading Singapore CFD Sheng Siong could be a strategic choice to minimise cash outlay.

Chinese New Year: Three Cases For CFD TradingSource: Tradingview.com


Oil CFD

Chinese New Year: Three Cases For CFD TradingSource: FreePik


Globally, the demand for oil is expected to rise. The Straits Times Index has noted that the Chinese New Year period is typically the busiest period for traveling, suggesting a potential bullish scenario for oil.

Chinese New Year: Three Cases For CFD TradingSource: Phillip CFD


BONUS: Trade Planning Indicator Giveaway

In this section, I’ll share a trade plan for CFD trading, emphasising the importance of risk management.

Below is an image of my proprietary trade indicator, which I use to advise my clients on trade planning.

Let’s consider US Oil as an example.


Bullish Scenario

Chinese New Year: Three Cases For CFD TradingSource: Tradingview.com


There is a visible downtrend channel. A breakout from this channel followed by a retracement, forming a second higher low, could present a trading opportunity.


Bearish Scenario

Chinese New Year: Three Cases For CFD TradingSource: Tradingview.com


In the event that bullish scenario did not play out, a bearish play would be to the downside towards 68 area.


Budgeting

Chinese New Year: Three Cases For CFD TradingSource: Tradingview.com


Above is a proprietary indicator which takes into account your CFD trading commissions and fees.

For a bearish scenario, with a S$10,000 account where a trader plans to risk 1% of his capital i.e. S$100 on this trade:

Entry price is US$71.5, stop loss at US$76.5, and target profit at US$66. By risking S$100, the trade indicator calculates that he should short 20 contracts.

Assuming a short-term trade of 20 days, the indicative cost of trading would be about S$$1.57.

The potential risk-reward ratio is approximately 1:2, which is very attractive.

The trade manager helps traders plan their trades and gives them a precise risk to reward ratio, taking into account the cost of trading.

If you are interested in this indicator, please contact me in my telegram group https://t.me/stocktradingandanalysis or email me at cfd@phillip.com.sg

If you are new to trading, open an Account with us and we’ll provide guidance to help you get started.


Conclusion

The examples presented above illustrate how traders can effectively plan their trades. The key steps include establishing a directional bias, preparing for various scenarios and carefully budgeting for each trade.

If you don’t have a POEMS account yet, you may visit here to open one with us today.

Lastly, trading within a community can significantly enhance the experience. You will get to interact with us, other seasoned investors and traders who are keen to share their knowledge and expertise.

In this community, you will also be exposed to quality educational materials and, stock analysis to help you apply the concepts. We look forward to sharing more insights with you in our growing and enthusiastic Telegram community. Join us now!

For more enquiries, please email us at cfd@phillip.com.sg.


Promotions

Chinese New Year: Three Cases For CFD Trading

From now till 31 March, stand a chance to get S$88 Cash Credits and a chance to win a 43” Prism TV when you fund and trade with us! *

*T&Cs Apply.

For more information, click here.


How to get started with POEMS

As the pioneer of Singapore’s online trading, POEMS’s award-winning suite of trading platforms offer investors and traders more than 40,000 financial products across global exchanges.

Explore an array of US shares with brokerage fees as low as US$1.88 flat* when you open a Cash Plus Account with us today. Find out more here (terms and conditions apply).

We hope that you have found value reading this article. If you do not have a POEMS account and are interested in trading, you may visit here to open an account with us today.

Lastly, investing in a community can be a highly rewarding experience. Here, you will have the opportunity to interact with us and other seasoned investors who are enthusiastic in sharing their experience and expertise whether it’s through listening or answering questions.

In this community, you will also gain exposure to quality educational materials and stock analysis, to help you appreciate the mindset of seasoned investors and apply concepts you have learned.

We look forward to sharing more insights with you in our growing and enthusiastic Telegram community. Join us now!

For enquiries, please email us at cfd@phillip.com.sg.


References:


Disclaimer

These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

About the author

Chua Minghan
CFA | Senior Manager, Dealing
Phillip Securities Pte Ltd

Chua Minghan graduated from the National University of Singapore with a Bachelor’s degree in Economics. He is passionate about education and went on to get a post-grad Diploma in teaching. His vision is to educate clients to make informed decisions for their trading and investments.

Minghan enjoys learning fundamental analysis, technical analysis, and strives to use data analysis to improve his trading skills.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you

IMPORTANT INFORMATION

This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  

 

Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com