One of the best things about spread betting is the ability to cheaply trade shares you might only want to be in for a few days or even just a month or two. There isn’t much cost and you can quickly bank (hopefully) a nice profit.
My favourite was to spread bet is to find some shares trading in a range which they repeat time and time again. Let’s take a look at a few examples of ones I have traded recently and ones that might maintain the same ranges for a while longer.
Utilitywise (UTW) has been establishing a range of 195-240p. Recently, a buy anywhere around the 195-210p followed by a sell in the 225-240p area has been paying dividends.
Usually with these ranging shares the market is saying, “Well, it seems cheap near the bottom of the range and starts to look fully valued at the top”. Often it will take a statement, results or a contract win to push the shares out of the range one way or the other.
The plan with Utilitywise could be the following: If it falls below the 190p area, something is wrong and that could be shorted down further. However, a break much above the 230-240p area could see the good times roll and a move back up to the 300p area. For instance, if you went long at 200p-ish, a stop could be established at around 190p to ensure you’re not caught by a move down.
The best trading shares are usually ones where the company is quite solid, as you don’t want to be caught by, say, a small oil company which finds water instead of oil.
Here’s another, Telecom Plus (TEP): a nice company where I have a large long-term holding which I expect to hold for the next 5-10 years for income but one you can make a few quid out of a little more short-term too. There is rock solid support for the share at just under a tenner and it runs out of steam near the 1200p mark.
As I write it is nearer the 1000p area, where it’s a buy. Once it moves it can quite quickly go up 150-200 points, which is fantastic for a spread bet. A stop at 975p would prevent any major damage being done. The £10 to £12 range could carry on for a while.
You’d previously have made a packet through buying at a tenner and selling at just under the 1200p mark, then shorting back to a tenner, then buying back on the up etc. If Telecom Plus can break out through 1200p then there’s a possible 200/300 points available to the upside back up to 1400p or 1500p eventually.
A break out at the top of a range can often see even more gains. It’s often worth waiting to see whether your trading range share breaks out of its previous range.
A case in point is Dominos Pizza (DOM), the famous seller of very expensive cheese on toast. This one established a range of 650-700p over the last 6 months or so. However, it broke through the 700p area all of a sudden, and not long later you’d have been able to bank 100 points as it soared up to 800p.
At this point there’s a good chance it will establish another new trading range, possibly 800-750p. Indeed, Dominos has been a splendid trading range share for years with an underlying uptrend. It’s worth keeping an eye on this one as it could bring home short-term gains for years to come without any worries about people stopping to eat pizzas, so you do your dough with a profits warning…
Finally, (I need to order a pizzas urgently) one with a super range is Regenersis (RGS). The last 6 months have seen a super range of 200p-ish to 230p-ish or 250p-ish, and it has repeated this a number of times, giving traders many a chance to bank profits.
There is very strong support for the shares at just under 200p, so if you can get any around 190-205p it’s usually a good trade. Like the others, there is potential for further gains should it break up out of its range. So any move above 250p would be a very strong signal for a big and possibly quick move up to the 300p mark.
Right, my pizza’s here so I’m off to establish an eating range.
P.S. I’m off for a skiing trip so I won’t see you next month, but I’ll be back the month after.
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