I am a part of the team which is responsible for management and hedging of commodities exposures. Some say corporates are good only in following advice from banks or brokerages. I do agree corporates do not have market insight of a bank. But here is a problem. It is not bank or broker or a hedge fund that has biggest risk that markets will go against them. These guys always have an option to do nothing and wait for a better trading opportunity where as we don't. We have to continue to purchase commodities, spend currencies for daily business. Such company is always exposed to changes to market price even if it decides not to hedge. In fact my company has probably one of the biggest short commodities portfolio in the world. Managing such risk effectively is a challenge. It is like being between a rock and a hard place. You get your behind kicked all the time be senior management, whether it was a missed opportunity to hedge or hedge that turned to be out of the money. Critics will say if you lost money on your hedge then you probably bought it cheaper on physical market. let's face it, nobody wants to loose money, full-stop.

So I do not have an option to do nothing as I am always in the position (short in this case). I think people like me have higher motivation to earn positive return on their portfolio then other players. In fact my intention is to bring hedging to a performance benchmark of proprietary trading.

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Wednesday, July 21, 2010

A different approach - what could earnings season bring us? PART 7

I continue on my quest to provide chart analysis ahead of earnings for the companies in DJIA. Today we will have United Technologies and Coca Cola.

Both companies continue trading in downside channel despite yesterday's strength. UTX:


Need to see close through 68 to invalidate down trend. Up trend is only to resume if 70 is broken. Market has too many obstacles ahead: 100d, 200d and uper bollinger band. Momentum is turning down so there is risk we can see gap up on the open and market to end on the lows of the day as it happened with other stocks in the index.

Coca Cola:

Coca Cola is trading in well defined downtrend and only break through 54.36 (200d) will open significant upside. May be, just maybe following PepsiCo results recently we can have this stock finish higher on the day.
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