Medium term
Trade view / 20 November 2014 at 10:13 GMT

German Schatz dip a draw once more

Chief Investment Officer / ACIES Asset Management
Switzerland
Instrument: SCHATZDEC14
Price target:
Market price:
Background

Although the German Schatz has clearly been in a strong bull market for the whole year, we had a very flat September and October. The price appeared to have moved up too far, too fast, and the rally stopped in its tracks. It didn't fall back but it ran out of steam after that last push up in early September. 

Since then, it appeared to be dangerous to enter new positions on the long side. After all, the price level was remarkably high and there was a lack of short-term momentum. In such situations, it's safer to wait for a dip before going in. These past few days have provided just such a dip.

Back adjusted German Schatz futures continuation
ebs

Source: CSI Data

The chart above shows the trade signals for a classic counter trend entry model. The idea is to always trade in the direction of a strong trend but to enter only on a significant pullback. The trick is, of course, in quantifying that pullback. The method used here is to normalise the distance from the recent peak to volatility, to have a uniform measurement to work with.

Management and risk description

Buy in to the December Schatz, FGBSZ4, on current levels. Note that we're still in December. There's not yet any significant liquidity in the March. Set a fixed stop and target in the market for a known risk and potential reward.

Schatz dashboard display
Ebs dash

Source: Following the Trend

Parameters

Entry: Enter at current levels, around 110.86 EUR.

Stop: Hard stop at 110.782.

Target: Take profits at 111.016.

Time horizon: Around two weeks.

December 2014 Schatz contract
FGBSZ4
 
Source: ThomsonReuters

-- Edited by Kevin McIndoe

Find more views on commodities here.
4y
aidamarklough aidamarklough
This comment has been redacted

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail