Spread Betting on HSBC: HSBC Rolling Daily
Trading or spread betting on bank shares such as HSBC can be very lucrative at the moment, as there is uncertainty and that means the possibility of large swings. The chief problem is what the Government may choose to do following the enquiry into competition in the retail lending trade. Here’s HSBC’s weekly chart -:
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After the crash, HSBC picked up, but for this year has been in a steady decline. The 240 day moving average shown in khaki, is now above the price, indicating a long term downtrend. The 60 day moving average in light blue is also above the price, so the mid-range trend is also downwards.
The outlook for the banking sector as a whole is shrouded in doubt. Recent developments include a banking levy designed to raise £2.5 billion, as announced in the Budget, in order to tackle the impact of the crisis. The levy is really aimed at exacting a contribution from the banking sector to retrospectively cover the risks that have already been taken, and to discourage the riskier lending practices.
HSBC (HSBA) is likely to benefit as the central bank tries to tinker the yield curve. Going further, the Treasury Select Committee has proposed major breakups of the largest banks. This is intended to create more competition in the retail lending trade. Government is able to do this for the partly state-owned banks, but this may be at odds with the remit of UK Financial Investments, which body is charged with working to protect the taxpayers’ investment and try to maximise the returns. Having said that, HSBC is somewhat shielded because due to its geographical diversification; in particular its Asian exposure which makes it less dependable on the worrisome European and North American markets. However, the bank’s future remains clouded by the UK’s Payment Protection Insurance mis-selling scandal and glaring stories involving money-laundering in Mexico while persistent global worries about the economy are likely to pressure earnings growth and/or the bank’s bad debts.
Looking now at the daily chart for HSBC, we can see the trendlines confirming the downtrend again, and the Bollinger Bands are being well adhered to, which can provide trading opportunities. As a reminder, in an upward price movement, in this case a retracement against the underlying trend, you can expect the price to touch the upper band and run along it. In a downward thrust, the price will treat the lower Bollinger Band as a support, and only break through it temporarily, unless there is a major shift in trend.
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You can see that the price has been very well behaved to these principles in the daily chart. It is usually taken that a penetration of the centreline, which is a 10 day Simple Moving Average in this case, indicates that the direction is changing. Around May was a high volume Spinning Top candlestick which normally is a strong reversal signal. It did reverse, but then resumed the decline, which is unusual.
If you are spread betting HSBC Rolling Daily you are on the lookout for share prices that show some movement, and that’s just what you can see on this chart. Getting on the right side of the trade more than compensates for any overnight interest charges when a stock price is moving like this. On the right edge you can see that the price has clearly crossed the centre line of the Bollinger Bands, and looks set to retrace upwards for a while before resuming the downtrend. Keep an eye out for reversal patterns, and any drop back through the SMA10, which would signal a time to go short.
HSBC Rolling Daily Shares Example
How to Spread Bet on HSBC shares?
HSBC’s pretax profits for the half year of 2012 amounted to $12.7 billion representing an 11% rise from the £11.5 billion the bank earned for the comparable period last year. This beat analysts consensus estimates of $12.5bn, helping to lift market sentiment. Having said that the bank had to account for $1.3 billion to cover potential liabilities for mis-sold payment protection insurance claims and another $700 million to cover fines relating to the money laundering scandal in the United States. Furthermore, new regulations including the introduction of Basel-III and Pillar-2 are likely to further pressure earnings margins.
Let’s assume that the HSBC Rolling Daily is currently being quoted at 671.0 – 671.9 -:
# You believe that HSBC shares are in for a short-term jump and decide to go long (buy).
# You go long by buying £20 per point at 671.9 in HSBC Rolling Daily.
# Over the next 2 weeks HSBC rises and the new quote is at 710-711.1. You decide to close your spread bet by selling at 710.
# Profits = (closing level – opening level) x stake = (710 – 671.9) x 20 = £762.
*Daily small financing charges for long positions have been excluded for simplicity.
Traders spread betting on HSBC shares would have made a gain or loss depending on whether they took a long or short position. Remember that spread betting is leveraged so you can incur losses greater than your initial deposit. Ensure you fully understand the risks.
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