2011-03-21

Those who have been watching the news no doubt are aware of the tremendous volatility in the Nikkei 225 index for the last two weeks.  Like Larry Berman who said on his TV show on BNN titled Berman's Call, I too find it hard to advice clients how to make money during this calamity that has happend to Japan.  I wish the people well and pray for them.

Never the less my job as a Financial Planner dictates that I be aware of opportunities that arise from both good and bad fortune to add to the fortunes of my clients, and so I decided to start this online diary or blog to record some of my thoughts to serve as a record of my work during this tragic time.

Of course some readers may apply the ideas mentioned in this blog to their own investment portfolios, therefore I need to disclaim upfront the warning that you do so at your own risk.  For if you are indeed to apply my ideas the least you should do is join my weekly meetings where SL, JL and I gather for drinks and trade together with our laptops.  There you will realize I hold my position sometimes overnight, sometimes for for hours, sometimes for mintues, and to follow just one trade and not the subsequent sequence of trades will make you either a very rich man or render you in debt and homeless, and if you are debt then SL can help you in that situation.  I think you get the point.

As of this moment (2011-03-21, 11:07 pm EST) the Nikkei 225 is close to intra-day high 9505 having gapped up a few hundred points from previous day, which is last Friday for yesterday Monday 20th was a public holiday, and has been hovering at this level much to my annoyance.  I say I am annoyed because I was expecting a lot of volume and volatility and has been reserving my available margin to go in Long right at market open (8:00 pm EST) for at least two waves of "spike" of at least one hundred points each to reap a sizable gain.  Yet that has not happened.  Instead the Nikkei 225 is like a dead rattle snake in its cage, with no breath to pounce at all and this has left me very unsatisfied.  So I did a Sell-To-Close all my contracts for a decent profit and am now sitting in All Cash.

Nikkei 225 is now 9515 (2011-03-21, 11:14 pm EST).

I realise now the title of this blog is "Trading Japan March 2011" and will appear so to Google's search engines forever, but since I just sold all my nikkei index futures contracts should I buy them back just to keep with the program?  No!  Of course not, why trade that vehicle if I am not confident, that would be foolish.

Last night JL and I revisited ZW, or wheat futures, specifically US Wheat May 11, and I am currently of the opinion that 713 is still a bit too high to go Long.  However I caution I would not Short ZW at this 713 level as it might spike higher.  Based on my charts I am waiting for wheat to drop to 650 and would then go Long for 10 contracts.  If wheat continues to fall after I have opened my position I will continue to accumulate 10 more contracts at 625 and another 10 more contracts at 600.  In this negative scenario I would have bought 30 contracts with an ACB of 625 and would be praying for market news to announce another supply shortage due to drought etc.  Worse case scenario would be for ZW to continue to fall and I would be liquidated at 550.  So far there does exist the possibility for ZW to fall to 550 but the probablity is very low, I recall the folks at LTCM said the same and the markets proved them wrong.  Never the less that is my game plan.  Upside is to capture 30 points with 30 contracts for an expected gain of 9000 and that can happen overnight.  I always trade wheat overnight because it is in the gap-ups or gap-downs that I profit, never intra-session for the price movement, or intraday volatility, is too small for me.

My fingers are itching to pull the trigger on Crude May 2011 currently at 103.235 (2011-03-21, 11:35 pm EST) to Short it but I understand the Libya situation can cause over-reaction in the market and I will not be happy at all to wake up tomorrow to be in the house of pain.  Instead I placed the following three orders;
Sell 10 contracts at 105
Sell 10 contracts at 106.5
Buy 5 contracts at 103

The reader may be correct that using Options and doing a Spread may be better risk management, yes you are right but I do not have that capability on my trading platform.  What I do have is time to watch the movement of Crude during the week from Sunday night to Friday afternoon, for that is all I do, I look for investment opportunties for my clients and I eat my own cooking.  Let me add that Oil Vix was 39.10 down 2.80 today.

So much for my first blog and if I have time and patience will blog during the day as I go in and out of positions.  Kind of like Mark Zuckerberg as he blogged his way through creating face mesh in his doom room.  He is one of my heros and the movie is awesome but not as exciting as the book, go buy Accidental Billionaires.

Nikkei 225 is now 9528 (2011-03-21, 11:57 pm EST) and this Ascending Wedge is very tempting, stay tuned.

Jeff