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Spread trading opportunities: Vedanta and Tullow Oil PDF Print E-mail
Written by Will Peters   
Tuesday, 17 August 2010 14:57

Two resource stocks could offer good long term spread trading opportunities. But beware the underlying market conditions!


Spread trading on Tullow Oil and Vedanta Resources could prove profitable on a long term basis as the two companies are believed to be undervalued at current levels.

Tullow Oil Plc has been set a fair value share price at 1504 by the equity analyst team at Credit Suisse, that is 19.18% higher than at this morning's opening price of 1262.

Vedanta Resources has been set a target share price of 2600, that is 20.76% higher than this morning's opening of 2153.

But, long term spread trading strategies could be considered highly risky in the highly volatile markets currently being experienced.

Today risk sentiment is back - a scenario that would usually support long spread bets.

Stocks rose across the world today after reports showed the first rise in wholesale prices in the US since March and a big jump in industrial production.

A slight improvement in the weak housing market and better-than-expected earnings from Home Depot Inc. and Wal-Mart Stores Inc. also gave investors a reason to buy.

The Dow Jones industrial average jumped 48 points in morning trading. Broader indexes also rose.

Economic reports in recent months have almost exclusively pointed to slowing growth. Weakening data has led some investors to worry that the country could fall back into recession. The data Tuesday provided a slice of optimism and some reassurance that the economy continues to expand, albeit slowly.

Prices at the wholesale level rose 0.2 percent last month, the Labor Department said, lessening worries about deflation. It was the first increase since March and matched expectations of economists polled by Thomson Reuters. Excluding volatile food and energy costs, the index rose 0.3 percent in July, more than the 0.1 percent growth predicted by economists.

Jitters over a double-dip recession have many investors looking for the first signs that prices and wages are on the way down. If that happens, it will trim profits and potentially dampen hiring even more.

High unemployment is considered the biggest obstacle to a strong recovery right now.
 

Risk Involved

Spread Betting and CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. These trading products may not be suitable for all investors so seek independent advice if necessary.

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