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Welcome to Marketworx
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  1. Welcome to Marketworx Shaun van den Berg Head of Client Education at PSG Online Tuesday, 24 July 2012

  2. Marketworx: Technical Analysis & Trading Tuesday, 24 July 2012

  3. Marketworx Agenda Investor Make Money Trader SSF Equities CFD

  4. CFD Product Description Derivative - A contract whose value depends on (or derives from) the value of an underlying share e.g. share – ANG, BIL, SOL Go ‘Long’ & ‘Short’ with CFD’s on Top 100 JSE listed shares • Margin deposit requirements • 15% Top 40 shares / 17.5% on next 60 shares Variation margin required for adverse share price movement. Brokerage = 0.4% per transaction Breakeven = 0.92% (VAT included) Zero STT • Financing at competitive rates: • Current borrowing rate 7.50% (± Prime – 2%) Minimum Exposure per trade of R25 000 (R4 500 margin)

  5. Top 100 Shares: CFD Margin 15% Top 40 17.5% Next 60 List reset after each Quarterly futures Close out

  6. You pay a script lending fee of 1.5% p.a. (Min R250) Receive interest at SAFEX - 2 % p.a. The holder is liable for the dividend Dividend is not earned tax free as a CFD is a derivative contract In the case of a short CFD, a holder of a short contract will have to pay the dividend to the issuer CFD Long & Short Positions • Pay interest at SAFEX + 2 % p.a. (± Prime -2%) • The holder will receive a synthetic dividend • Dividend is not earned tax free as a CFD is a derivative contract • In the case of a Long CFD, a holder of a long contract will be paid an amount equal to the dividend by issuer. • This is seen as an income and is subject to tax

  7. CFD Order Book Buy 100 Anglo shares @ R339.05 Exposure = R33 905.00 15% Margin = R5 085.75 R305.15 100 Anglo shares = R33 905.00 0.4% Brokerage = R135.62 14% VAT = R18.99 Total = R154.61 R33 905 x 7% = R2373.35/365 = R6.50 per day

  8. Advantages Disadvantages Gearing & Risk No voting rights Pro’s & Con’s of CFD Trading • Low trading costs • No expiry date • Hedge your current portfolio? • All the benefits

  9. Comparison with traditional shares

  10. What are SSFs? A standardised contract. Of a standard quantity (100) of a specific underlying listed share Requires a fixed margin deposit to open a position (around 15% of the total value). Expires on a predetermined future date: Third Thursday of every March, June, September & December. Gives the owner the right to close the contract at a price agreed when entering the contract, including all relevant dividends & interest. SSFs are listed on the South African Futures Exchange (SAFEX), a subsidiary of the JSE. • SSF contracts equate to100 shares of the underlying instrument. • SSFs are created at the close of trading. • All unmatched SSF orders expire at the end of the trading day. • All partially matched orders will be cancelled at the end of the day.

  11. Comparable to Equities INVESTOR A (Share Trader) INVESTOR B (SSFs Trader) Confident that Sasol shares will increase. Confident that Sasol shares will increase. She has R35 000 which she can invest. Sasol’s share price is R350,therefore she buys 1 contract. Sasol’s share price is R350,therefore she buys 100 shares. The initial margin set by the broker is R6 000 which is paid by the buyer. 3 months later the price has increased by 10% so she sells her shares to make a R3 500 profit. After 3 months the price has increased by 10% & the investor closes out his position & sells out of theSasol SSF contract. Her return on her investment is 10%. His profit is R3 500but his return on his investment is 58%.

  12. SSF CFD Unregulated Trades OTC No Expiry Date Principle amount could change Interest fluctuates daily Retail interest rates No best execution obligation Captive markets Opaque Not guaranteed by SAFCOM Manufactured dividends Never physical delivered Comparison between SSFs &CFDs • Regulated by JSE/FSB • Exchanged traded product • Expiry Date= Rollover costs • Set principle amount • Interest agreed upfront • Wholesale interest rates • Best execution • Free markets • Transparent • Guaranteed by SAFCOM • No dividend paid/received • Fungible financial instrument • Can take physical delivery

  13. SSF Margin Initial margin per contract Top 100 Shares ALSI & ALMI Copper, Gold, Platinum, Silver & WTI Crude Oil

  14. SSF Simulator (SSFSM) Step 1 Select SSFSM Step 3 Click Reset Simulator Step 2 Check R100 000

  15. SSF Simulator (ALSI) ALSI – Most popular Top 40 Shares Liquid, Cheap, Tight Spreads Long & Short

  16. SSF Simulator (ALSI) 19 point spread = R10 x 19 points = R190

  17. New Order (ALSI Buy) Example 1: Buy (Long) 1 contract @ 30 050 Step 1 Select Direction Step 4 Click Submit Order Step 3 Enter Points Step 2 Enter Contracts

  18. Trade History (ALSI Buy) Select Trade History Margin Movement Margin = R27 450 Exposure = R274 500 Cost R25 per contract R10 per point 100 points move = R1000

  19. Financial History (ALSI Buy) Select Financial History Margin & Brokerage R25

  20. New Order (ALSI Sell) Sell (Long Close) Moves up to 30 350 = 300 points move x R10 = R3 000 Step 1 Select Direction Step 4 Click Submit Order Step 2 Enter Contracts Step 3 Enter Points

  21. Trades History (ALSI Sell) Profit or Loss Margin Returned

  22. Financial History (ALSI Sell) Select Financial History

  23. SSF Simulator - Portfolio Select Portfolio Example 2: Buy (Long) @ 30 050 Moves down to 29 921 = 129 points move x R10 = R1 290 loss (Margin Call) Example 3: Sell (Short) @ 30 050 Moves down to 29 689 = 361 points move x R10 = R3 610

  24. SSF Simulator (ALSI) 65 point spread = R1 x 65 points = R65 Margin = R2745 Exposure = R27 450 Cost R5 per contract R1 per point 100 points move = R100

  25. SAB Miller (SAB) Buy (Open) SABSEP12 contract @ R325.00

  26. Position Size & Margin (SSF) • You have R100 000 in your SSF account • You are willing to risk 2% of your capital = R2 000 • You decide to buy SAB Miller (SAB) at R325.00 • You set a stop loss @ R320.00 • R325.00 – R320.00 = R5.00 • Take R2 000 & divide it by the R5.00 per share that you are risking (R2000 / R5.00) • Your position size = you can buy 400 shares (400 shares = 4 contracts) • The SSF initial margin required per contract is R2 625 • R2 625 x 4 contracts = R10 500 initial margin • 4 x 100 x R325.00 = R130 000 exposure

  27. New Order (SAB Buy) Step 1 Select Direction Step 4 Click Submit Order Step 2 Enter Contracts Step 3 Enter cents

  28. Position Size & Margin (SSF) • Initial Margin = R10 500 • R2 625 x 4 contracts • Exposure = R130 000 • 4 contracts x 100 shares x R325.00 • Brokerage cost = R671 • R130 000 exposure x 0.47% = R611+ R60 • Target Price = R347 • R325 + R22 • Reward = R8 800 • R22 x 4 contracts x 100 shares • Risk = R2000 • 4 contracts x 100 x R5 • Risk : Reward Ratio = 1:4.4 • R2 000 / R8 800

  29. Summary: SSF Simulator • Trading the ALSI • Most popular instrument • Top 40 Shares • Liquidity (± 40 000 contracts per day) • Cheap (R25 per leg) • Tight Spreads • Long & Short • Trading Equity SSF • Long & Short • Trade spot market • Cheap (0.47% inclusive per leg)

  30. Marketworx Agenda Investor Make Money WEN Charting Technical Analysis Trader SSF Equities CFD

  31. Share Market Analysis Share Market Analysis Technical Analysis Fundamental Analysis Price Macro Fundamentals Micro Fundamentals Volume

  32. Technical Analysis Technical Analysis Fundamentals Price Volume Supply & Demand Trends Patterns

  33. Market Psychology 1st Stage Things would not always be rosy 3rd Stage Things will get better forever 2nd Stage Things are deteriorating 2nd Stage Improvement Is actually underway 3rd Stage Things can only get worse 1st Stage Things are getting better

  34. Secondary Indicators Technical Oscillators Stochastic Indicator MACD Indicator Volume Analysis OBV Indicator Relative Strength Analysis Relative to Sector Relative to JSE Overall Technical Analysis • Price Charts • Closing Line Charts • Bar Charts • Bar Volume Charts • Candlestick Charts • Moving Averages • 200-day EMA • 50-day EMA • Breakout Trading • Cycle & Trend Analysis • Support & Resistance • Trend Lines • Continuation Patterns • Reversal Chart Patterns

  35. Price Charts: Closing Line Chart

  36. Price Charts: Bar Chart High Close Open Low

  37. Price Charts: Bar Volume Chart

  38. Price Chart: Candlesticks

  39. Technical Analysis Checklist Trending(Up/ Down) Cycles Support & Resistance Moving Averages Trend Lines Overbought/Oversold Stochastic / MACD OBV Outperformance/Underperformance Relative StrengthAnalysis

  40. Trends & Cycles Bull Bear Corrections Rallies Sideways

  41. Trends & Cycles Bearish Trend Bullish Trend Bullish Trend

  42. Market Cycles - Bull Higher Highs, Higher Lows

  43. Market Cycles - Corrections

  44. Market Cycles - Bear Lower Highs, Lower Lows

  45. Market Cycles - Rallies

  46. Moving Averages

  47. Support & Resistance Reversals

  48. Support & Resistance Resistance Resistance Resistance Resistance Support Support Resistance Resistance Support Support Support Resistance Resistance Support Support Support Support & Resistance levels highlight possible “turning points”

  49. Support & Resistance • The more times a share price has touched these areas, the more valid these levels are &themore important they become. • The longer these support & resistance levels have been in play, the better the outcome when the share price finally breaks out.

  50. Support & Resistance - Bull Resistance Support Support Support Resistance Resistance/Support