Companies: AEP    DGO    DNX    DOO    MPE    RE.    SIA    TLW   

I am bearish on the markets mainly because September is seasonally a week month. So I have just started shorting the major markets and I am looking for a good correction from the recent gains.

At the same time gold looks ready to push higher in the coming weeks. The recent moves in the FTSE and DAX, although impressive, have left the indices looking toppy and they have raced away from their 200-day moving averages. The 200-day moving average is currently sitting at 4,980 for FTSE and 4,400 on the German DAX. Look for five to ten per cent pullbacks, a bit of sideways action and then a move higher towards the end of the year. For now I really think you have seen the highs.

Elsewhere currencies are very hard to read at present and I would advise you to stay out until clearer trends emerge. Commodities, with the exception of energy markets, are also starting to go into sideways trading ranges.

An oil market that no one talks about

Although I am bearish overall on the major indices, you will still find some very strong-looking individual shares. If you look at a list of shares hitting 52-week highs you will find the main ones are oil related and include Soco International, Dragon Oil, Dana Petroleum and Tullow Oil. And, as you may be sick of hearing about crude oil prices and petrol almost hitting £1 a litre, I want to talk about alternatives to oil and an oil market that few ever talk about: palm oil. Well, how do I run my motor on that? Well, you can’t at the moment but the day is getting closer to blending vegetable oils to run vehicles. Not only is it cheaper, it’s better for the environment.

But first let’s look at palm oil itself. Its main use is in the food industry and cosmetics. You can’t easily trade palm oil futures but you can trade shares that have a good exposure to planting and processing the oil. These companies have had their own mini oil boom as demand for processed foods increases in China and India. India is a big buyer of palm oil. Some of the shares to look at include Anglo-Eastern Plantations, REA Holdings, MP Evans and D1 Oils.

These companies don’t have their own sector, as FTSE closed the plantations sector in 1993, so they are scattered under food producers, farming and chemicals at present. The shares get very little coverage but even after the big moves I can see them going higher. Most of the companies are relatively small so they will be hard to spread bet but you can buy shares via a stockbroker. I would not normally feature these smaller companies in my spread betting column but I am really bullish on the prospects of palm oil.

D1 Oils is involved in planting and distilling the jatropha plant. This can then be blended with regular diesel. All diesel sold in France is already blended with 2% of biodiesel product. India and Thailand have also committed to using biodiesel. It’s not going to happen over night but, with higher crude prices, the push towards biodiesel is going to happen a lot quicker than if oil was still at $20 a barrel. The environmental story is all well and good, but as we know it’s the financial side that will make companies and consumers act. Shares are quoted at 370p.

Until next month, happy trading.


Vince Stanzione has produced a home study course to teach private investors how to benefit from trading financial spread bets and fixed-odds, priced at £347. For more information please visit www.fintrader.net or telephone 01908 330748 (24hrs).