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

German Schatz dip a draw once more

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

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

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


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
Source: ThomsonReuters

-- Edited by Kevin McIndoe

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