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Wednesday, December 07, 2022

Europe falls after Powell’s words

Europe falls after Powell's words

*When a candle close is signaled, it means that a candle close is opposite in the direction of the indicated scenario (this can happen all day), and it will be a single event in the extension. It is important to note that, in most cases, confirmation is followed by a movement in the opposite direction before taking the direction of the breakout.
*When we talk about an extension, we mean when the 30 minute candle is above or below the previously indicated level. The closing price is always used if the price breaks above the level, but it is not considered a breakout confirmation if there is no closing candle.

Know all the macro information through the economic calendar.

Asian stock markets ended lower today on Thursday, also following yesterday’s sharp selloff on Wall Street in Europe, when the US Federal Reserve raised its fourth consecutive rate of 75 basis points in a widely anticipated move , while Fed Chairman Jerome Powell said. Rates are still “not restrictive enough” and a slow hike could come as soon as December or February, with the market now pricing in higher terminal fees.

For its part, the Bank of England is on track to raise interest rates by three-quarters of a percentage point today to 3%, its biggest rate hike since 1989, as it grapples with the highest inflation in 40 years.

UK Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt plan to expand untaxed taxes on oil and gas companies to raise about £40 billion over five years, The Times reported.

Meanwhile, Chinese officials have reiterated that the country remains committed to its zero COVID policy after an unverified social media post earlier this week raised hopes of a policy change.

Stocks in Australia, South Korea, mainland China and Hong Kong are all lower. Markets in Japan have been closed due to the holiday.

How to take advantage of opportunities in this market? Example of operation.

To illustrate how to trade in the example, we are going to use Ibex 35. At IG, we can trade this market with CFDs, Barrier, Vanilla Options and Turbo24. We are going to choose the latter for example, as it is a 24-hour market listed product, which allows us to optimize the leverage of our operations and cover against market gaps. In addition, there is no commission in Turbo24.
In this case, the minimum contract size will be the purchase of a long Turbo24 or a short Turbo, which is equal to 0.01 Euro per point. For our example, which should in no case be considered a buy or sell recommendation, as this is not its purpose, we are going to choose an amount equal to 1 Euro per point, i.e. one hundred Turbo24.
In the event that the first scenario is confirmed and a decision is made to enter bearish, we will buy a hundred Turbo24 shorts. Let’s imagine that Ibex 35 is trading, for example, at 7,893 points. We can set exit levels or knockouts (guaranteed stops), for example 120 points above the entry price (7893 + 120 = 8013 points). If at that time, the turbo cost 1.2 Euro, the requested guarantee (remuneration) would be 120 Euro (100 turbo x 1.20 Euro for each Turbo 24). The profit of this operation would be 65.76 times (7893 / €120 = 65.76).
Furthermore, it has the advantage that if there is an increase in volatility when the market closes that triggers our knockout, the trade is not closed. This means that, if it does so in our direction when opening the cash market, we will stay in and we can continue to make profits. On the other hand, when the market opens, it does so at a price equal to or higher than our knockout price, we are guaranteed a maximum loss on that amount initially deposited, so we are covered against market gaps .
In the event that the second scenario is confirmed and a decision is made to enter bullish, we will buy one hundred Turbo24 longs at the index price of 7931 points. We can set the knockout level, for example, 120 points below the entry price (7931 – 120 = 7811 points). If at that time, the turbo cost 1.2 Euro, the requested guarantee (remuneration) would be 120 Euro (100 turbo x 1.20 Euro for each Turbo 24). The leverage for this operation will be 66.09x (7,931 / €120 = 66.09), which will retain all the gains mentioned above and provide protection against negative balance in the event of a bearish market gap.

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