August 31, 2006

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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide. Now you can get this highly sought after analysis with your daily research newsletter from Phil Flynn. Learn more about this complimentary offer and sign-up today.

Today's Questions:

It's Time for Ask an Expert! Boy it was exciting to get all the questions from many of you all over the globe and it is great to see the interest in commodities is high! And why shouldn't it be. We have had some a very exciting year with some explosive moves, so with out further ado lets get too it. Here are some of the questions:

From J in Australia:
How do you calculate where to place stops?

Ah the age old question. Where are you wrong the market? The placement of stops is an art and a critical one at that. Stops are an invaluable tool to try to control your risk and increase your profit potential. Not to mention the fact that stops can also be used as entry points by many technicians. But the stop original and most common purpose is to stop your loss. Some people think the time to get out of the market is when their blood pressure hits 180 over 100. Others think it is when they run out of money. Yet in futuresthere may be no upside if your funds have unlimited down side. Of course many have feared using stops as they fear they may be taken out of a good trade prematurely. One of the best stories I have on the placement of stops is a client of mine that complained that he would stop using stops because every time he did he would be stopped out at the low of the day My answer to that was then he should instead be buying into the market where his stops were and that would then make him a solve his problem. In other words your original entry point might be more important than where your stop is in the first place. The question of where to place stops really depends first on what your profit potential is and what your time frame for the trade and the risk capital associated with the trade. A long term trend following trade for example would use a trailing stop below or if short above the monthly trend line, assuming of course that you believe that the trend has significant potential to out weigh the risk. Many Traders will want to place there stops below the low of a move or below the moving average. Some use Fibonacci numbers. Yet at times when volatility is high some traders want to extend the room they give it as that fear others will have there stops placed at the same area. Day Traders who don't care whether they are long or short will use pivot points or pre-determined support or resistant points. They may use one resistance point as and entry and place a second stop up above the next resistance points. The truth is that there is no one simple answer. A lot depends on you objectives and your ability to handle risk. And a good stop placement for one trader may be too much risk for the next.

Get daily research letters from Phil Flynn of Alaron FX

Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide. Now you can get this highly sought after analysis with your daily research newsletter from Phil Flynn. Learn more about this complimentary offer and sign-up today.

From Menorah in India who asks:
Sir, in your view {do} technical score over fundamentals or vice versa? Give me your valuable opinion.

Nalia from Pakistan asks:
What impacts the market more, market fundamentals or technical factors?

Dear Menorah and Nalia: 
The debate as to the value of technical trading over fundamentals is as divisive as being a Democrat or Republican or a White Sox or Cub Fan. And regardless which camp you fall into the hardliners will tell you that they indeed hold the key of truth. Die hard fundamentalists will tell you that the only way to trade the market is to have a solid view of the fundamental picture. They will point out that news is a proven driver of market moves. Whether it is an important economic report or a major geo- political or weather, the fundamental trader would say you are crazy to ignore the impact that those events can obviously cause to the movement of price.

Not so says the technical trader. They say the only way to trade is to follow the charts. The charts they say are a true predictor of future price moves. As to the critics that technical trading doesn't take into account the news, the committed technical trader wound tell you that the charts actually predict the news and if you trade the charts correctly you will have a advantage over fundamental traders who have to wait and interpret the news. The technical trader swears the charts foretell the news and that it doesn't matter because the charts tell all. Yet as in most ideological debates it is often found that the truth is found somewhere in the middle. (Except for the White Sox, Cub debate, White sox all the way!)  I feel it is very important to have a long-term technical outlook for a market yet I think that you should also trade the fundamentals as well. I think that the interpretation of the charts are more clear if you have an idea what the news is or supply is or etc..

Hank from Sparta asks:
What Technical tools to traders rely on?

Well the same ones that most others do. Many live and die by Fibonacci numbers and point and figure charts and Japanese candle sticks are popular as well. But it varies from trader to trader

Bruce from India asks:
What is the outlook for gold and crude for the rest of the year.

Well Bruce, I think the outlook is down right bullish Crude should test the high of $7840 and possibly exceed it and gold based on strong demand from your country should edge back towards $700. I think the weakness in gold will disappear as when traders return for holiday.

Hulaimi from Malaysia asks:
Will crude test $7700 and $7800 by the end of the year?

I say yes and yes. He also asks if crude oil and palm oil move in tandem. Hulaimi that is an interesting observation and it has some basis in fact as we are moving towards the use of more ethanol. That indeed helps influence the two markets moving in the same direction.

Anthony from Hawaii asks:
Did we have short term top in Crude and unleaded!

I think the answer to that is we did! But know I think you want to be long!

Phil Flynn is Vice President, Energy and General Market Analyst with Alaron Futures and Options and is one of the world's leading energy market analysts. Phil heads the Alaron Energies Futures Brokerage Division offering brokerage services to individual investors, professional traders and institutions. Phil provides up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

Phil and his energy team were one of the first to predict that global crude oil prices would exceed $30/barrel in the year 2000, a correctly predicted market milestone that has highlighted the economic scene in the new millennium. Phil also called the rise of retail gas prices in 2001. Most recently, Phil Flynn has again accurately predicted that global crude oil prices would reach close to $40/barrel ($39.99/barrel) in 2004. Through hundreds of media interviews, Phil Flynn and Alaron Futures and Options have become familiar names in living rooms and boardrooms worldwide. The world's print, broadcast, online media and small businesses have come to rely on Phil's accurate and animated forecasts, analysis, speculative and hedging opportunities.

Get daily research letters from Phil Flynn of Alaron FX

Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide. Now you can get this highly sought after analysis with your daily research newsletter from Phil Flynn. Learn more about this complimentary offer and sign-up today.