Trading Thoughts For The Week Ahead  - Sunday 18th July

This week's guest is Kyoto and gives his own thoughts on the week ahead and a personal view on his trading strategy. If anyone else would like to be the guest next week please let us know by emailing mike@moneyam.com

Monday 19 July Q2 Results ARM Holdings - ARM increased Q1 revenue and profits, but this is not likely to be repeated in Q2. Group royalty revenues are reported one quarter in arrears and strong seasonal shipments in Q4 2003 were not repeated in the following quarter. Long-term potential is fairly solid.Economics - Internet Connectivity - E-Commerce has a huge impact on the way businesses operate, and this index of connectivity surveys a panel of ISPs, collecting data on the number of active subscriptions, types of connections to the internet and access plan used. Download the report at www.statistics.gov.uk.Tuesday 20 July Q2 Results CSR -The shares of this bluetooth radio designer have more than doubled since floating at 200p in March. A recent trading statement prompted broker CSFB to raise its forecast for 2004 from 16.7p to 21.3p EPS, and 24p for 2005, up from 19.5p. EGM Pillar Property - Pillar is proposing a return of 108.6 million of capital to shareholders by way of a special payment equivalent to 1 per share held. In the year to 31 March, the groups Hercules Unit Trust made 186 million of disposals, and is distributing proceeds as part of its ongoing policy to return excess capital.Wednesday 21 July Ex-Dividend Burberry - May prelims were well ahead of expectations, resulting in a 50% increase in final dividend to 3p. Sales showed underlying growth of 15%. Burberry opened nine new stores in the year, increasing sales area by 12%. Seymour Pierce raised its 2004/05 forecast to 156 million profits and 20.7p EPS. Ex-Dividend London Stock Exchange -The Exchange is rewarding investors by way of a special dividend of 55p per share, payable to shareholders on the register on 23 July. The return will be accompanied by a consolidation of the current shares in issue on the basis of six new shares for every seven existing shares.Thursday 22 July Interims AstraZeneca - The UK drug giant has disappointed investors of late. First-quarter results in April fell below market expectations and analysts have begun to question its 25% premium to the European drugs sector. Strong sales of cholestrol-lowering drug Crestor could be threatened by recent newsflow. AGM Cable & Wireless - Investors are somewhat annoyed by the lottery-style pay awards that management continues to reap. Board members enjoyed a 7.3 million payout last year, in spite of a third consecutive year of losses. This year, shareholders anger is likely to focus on the 1.8 million thrown at ousted directors.Friday 23 July AGM Northern Petroleum - The group recently sold its Irish interests, helping it return to the black and leaving a year-end bank balance of 1.8 million. It is now concentrating on two fields in Spain and the Isle of Wight. Northerns potential may be hampered by lack of scale and uncertainty over future crude prices.AGM UBC Media - Losses were reduced in the year to March on the back of tripled sales figures. Classic Gold Digital performed in line with forecasts thanks to commissions from the BBCs digital channels. The big question among shareholders remains the future potential of digital radio.TRADERS THOUGHTS When I was asked to do this weeks Traders "Thoughts" I hesitated for about 20 minutes. Thats probably about 19 minutes more consideration than some of my trades get. I was hesitant because although I trade, I am not a full-time trader; I work for a large corporate and as Im often sat at a desk in an open-plan office, its led me to a certain trading style based on limited access to information, tools, the Internet and luck. As something of an underground trader therefore, I often feel like an amateur alongside some of the traders here, sat on their pivot points brandishing their MACDs, so I wasnt sure what I had to contribute. But I concluded that quirky as it is, there is some kind of method in my madness, I enjoy trading and although I still have much to learn, theres no shame in being a part-timer just more potential for making a fool of oneself sometimes :-) Having looked back at the posts of the previous four guest thoughters, I thought for my slot Id write a little about my trading strategy before finishing up with some comments about the wider market.TRADING STRATEGY - EQUITIES After some significant profits and losses stumbling through the dot-com boom and bust, I decided that long term investment wasnt for me and created two separate range-trading UK equity funds, one for safer blue-chips and a second smaller one for more volatile smaller-cap or higher beta shares.(SETS/SEAQ). I keep two shortlists of no more than 12 companies in each category, and I try to maintain as detailed a knowledge as possible of their businesses, usually buying when macro-economic factors or more localised news/comment appears to trigger overselling. Ill look at the 200DMA, 30DMA, PE, yield, growth, historical and numerical support areas as guides to specific buying points, alongside sector comparisons. I keep a record of intraday ranges and often buy when one of those percentage ranges is hit. I dont go off-piste into companies not on my shortlists, because Ive found that I tend to lose when in unfamiliar territory. I wont take more than one position in a sector. I aim to make between 2-5% on a position, but I will close if something changes in the underlying story. I dont employ a mechanistic stop loss as long as I have confidence in the underlying company. After three very good years trading turning the two original funds into four, this year is shaping up to be disappointing I havent been able to put in the research time so Ive traded less.TRADING STRATEGY - INTRADAY Ive traded on an intraday basis for about three years largely using CFDs as a sideline to my equity trading, and I usually stick to larger caps on my short list for the tighter spreads and higher predictability. I like to use my daily range percentages to provide an entry guide, and generally prefer trading before 11am so Im not second-guessing the US, although I sometimes dabble in US stocks directly. Ive found TSCO -2.25% Long, +3% Short, KEL -1%/+1% have been kind to me in the last few months, though Im constantly fine-tuning intraday ranges. KEL feels like a longer term short though is it going to finally behave? I employ strict stops but not too tight, though lately Ive held over several days sometimes and thats proven to be a mistake. On the increasing number of days Im office-based I dont have any kind of L2 access, which can lead to taking bad positions, but sometimes helps more than it hinders. Its one of the compromises I have to make though. One of my favourite shares to trade is SN. I dont work for them but for reasons, which can be guessed, I have to be careful what I say and I cant post my trades. But heres a thought. Take a look at intraday charts of BMET, SYK, and ZMH in the US and track them against SN. When I trade I keep a record of my last five trades per share as a tick or cross in a spreadsheet cell, alongside the cumulative profit/loss of those five trades. If I find myself with five losing trades or I lose too much as a percentage I stop trading that share, I accept Ive lost a feel for it and remove it from my shortlist. Sometimes I feel Im out of sync with the entire market, and Ill take a couple of weeks off trading (like now ironic I should be writing this then!)GENERAL THOUGHTS Personally I think banks look oversold (at least against their DMAs) and are going to rally soon, particularly BARC and riskier BB. (no positions). MRW is now 32% off its March-April range and 23% off its pre-warning price, which I think, is way overdone. Im long though (but sat on a loss), and therefore biased. I expect to hold until I see a profit or hell freezes over. BSY sub 600 and PIC sub 50 seem attractive. Im afraid Im not much of a chartist (hence no S&P/Dow chart here). Its not that I dont believe in charts, but at the risk of having a TA fatwa issued against me, I harbour a suspicion that they can be overused and inconclusive, especially on indices. Insofar as charts are nothing more than reflections of mass psychology there is a certain self-fulfilling logic to them, but I wonder whether the more TA theory is expanded the more fragmented its followers become, therefore becoming less likely to influence the market and provide reliable indicators. I do have a particular 4-5 month view on the US market though. The Presidential election is looming and historical comparisons aside which suggest a positive year, the tight nature of the election means that Bush-Cheney and their corporate and media allies need to do everything they can to bring the swing voters to their side. I think the market is being talked down at the moment despite a mixed if not mildly positive picture, and before long it will be talked and manipulated upwards into the election, creating a feel-good factor that will advantage Corporate Americas inner cabal and the global American hegemony they want to create. Click here for moreDow 11K? If they can do it, they will, and it might deliver the election to them. And if they could catch Osama at just the right time it will probably go up anyway I think the FTSE will do what the Dow tells it to but with less upside!

Kyoto

All the above comments are purely a personal opinion and no investment advice is intended. Please do your own research