Weekly Updates 8/5/23 – 12/5/23 May 8, 2023
This weekly update is designed to help you stay informed and relate economic and company earnings to potentially value-add your CFD (Contract For Difference) trading via hedging (risk reducing). This article should be used for educational purposes only and not as financial advice. We urge all traders to carry out your own due diligence before submitting trades.
Recap for last week (1 May 2023 – 5 May 2023)
*These prices are taken based on the previous Monday’s opening price and the preceding Friday’s closing price.
Market action for last week was bearish at the start of the week, until Apple released its earnings, Job data came in with a positive surprise and markets rallied. With most of the S&P 500 released earnings already, market participants start to shift their focus on Jerome Powel’s (Fed chairman) comments on both the economy and the banking sector. As First Republic Bank has been bought over by JP Morgan signaling the second large regional bank in the US that has collapsed. Putting stress on the overall financial system and stock markets.
Updates for the week (8 May 2023 – 12 May 2023)
The data below showing the economic releases read as “Analyst’s estimate/ Consensus | Previous data”.
This week’s macro economic news focuses mostly on the CPI data coming out of both the US and China. With the Fed being more dovish by mentioning that it will most likely pause rate hikes, market participants and the Fed are looking at CPI data to determine if more rate hikes are warranted. As CPI is a lagging indicator of inflation, any drop in CPI will likely signal the worst is behind us. Market participants need to be wary of CPI data releases as any surprise will cause markets to gap up or gap down.
This week’s corporate earnings releases focuses more on a few stocks that are more speculative in nature, from Palantir, Roblox, Rivian to Li Auto, SMIC and JD. Berkshire Hathaway’s annual meeting was hosted over the 6th of May, with Warren Buffet and Charlie Munger sharing their views on recent trends and themes.
Most sectors have their heavy weights release earnings the previous few weeks, investors can use the market leader’s earnings as a proxy on smaller players in the sector.
If you hold equity positions in these stocks, you can hedge your positions using CFDs to mitigate the risk of disappointing earnings releases.
For those looking to speculate or capitalize on the increased volatility, CFDs provide leverage and ease of going long and short across a broad range of products available.
Alibaba (9988.HK): Trading Opportunity
By Donny, Senior Dealer
Trade Set-up:
- Looking at the weekly chart of Alibaba(9988.HK), we can see that price has formed a ranging channel.
Trade Execution:
- We can look to take a long position if price move toward the support level(HK$80) and form a bullish candle.
- We can choose to take profit at the resistance level(HK$100)
- However, a break below HK$80 may signal a bearish move and the long trade should not be valid.
The Big XAU/USD Historic U-turn
By Kenneth, Head of FX
Trade Set-up:
- USD was sold off broadly last week, especially after Fed indicated openness to a pause in tightening after raising interest rate by 25bps on Wednesday.
- Gold rode on dollar weakness and risk-aversion, breaking through $2075 historic high, set on the 7th August 2020 when Russia invaded Ukraine. There was market talk of multiple stops and option plays getting triggered, explaining the quick push through the historic level before prices rapidly U-turning to return below the $2020 handle.
- Fundamentally, comparing the interest rate situation now versus the historic high in August 2020, Gold prices appear to be artificially high as the primary reason for the push higher was the guided statement from Fed chair Powell leaving door open for a possible pause in June on their series of rate hike.
- Technically, XAU/USD price is still on an upward trend but appears heavy with the RSI indicating a downward trend.
Trade Execution:
- The setup both fundamentally and technically suggests that investors will have better risk-reward should they look for short opportunities. The previous high of $2075-$2082 stands as a strong resistance area and investors can protect their short positions with stops in this area.
- Further confirmation of XAU/USD price weakness can be confirmed when the RSI crosses below the 50 level.
If you have any feedback or questions, feel free to email us at samht@phillip.com.sg or onishathyeyn@phillip.com.sg or cfd@phillip.com.sg.
Disclaimer
This material is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to buy or sell the investment product mentioned. It does not have any regard to your specific investment objectives, financial situation or any of your particular needs.
Accordingly, no warranty whatsoever is given and not liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of your acting based on this information. Investments are subject to investment risks.
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About the author
Sam Hei Tung (Dealing) and Onisha Thye (Dealing)
Sam graduated from National University of Singapore with a Master of Science in Finance. He personally manages his own investment portfolio and does equity and economic research in his free time. Sam believes that education and information is essential to making good financial decisions.
Onisha is a dealer at the CFD Dealing Desk. She graduated from Monash University with a double major in finance and econometrics. Her natural curiosity for finance is what drove her to be in this field as she is fascinated by all the possibilities and opportunities that are available to grow one’s wealth, either through trading or investment.
