Invensys is a comparatively young company, founded in 1999 through the merger of BTR and Siebe. It is multinational with offices in more than 50 countries, and specializes in controls and automation. The weekly price chart below shows a good degree of volatility, which is necessary when trading or spread betting, and it also reveals that the company has not been faring well in recent times. The reason for this is explained below.
Invensys is divided into three working divisions. The Operations Management division specializes in industrial automation under a variety of brands, such as Eurotherm and Wonderware. The Controls division includes brands such as Drayton. Finally, the Rail division provides railway control equipment with brands such as Westinghouse.
After its initial formation, the company rapidly hit financial trouble. It appears that company was severely underfunded and/or incompetently managed, and in 2004 it underwent a major restructuring program, which culminated with a debt restructure. The company traded healthily under new management for a few years, but ran into trouble again in 2011, as can be seen from the chart above. The share price was cut in half by this issue. This particular problem was concerned with providing control and safety systems for eight Chinese nuclear reactors. As the critical controls for the reactors were delayed, the episode cost the company £40 million, which is reflected back in the company valuation.
The MACD is quite clear in showing the downtrend of 2011 and into 2012, but the signalled uptrend since then has been weak, and currently it seems that there is another downtrend in the offing. Given that the previous downtrend halved the share value, Invensys as a company cannot afford many more mistakes.
Of course, if you are considering spread betting on Invensys, this is not a problem because it is just as easy to profit from a downtrend as an uptrend.
Invensys Rolling Daily: How to Spread Bet on Invensys Shares?
As Invensys has been going through troubled times in recent months, it will be no surprise if your detailed technical analysis leads you to place a short bet on the stock. The current quotation for a rolling daily bet is 221.15 – 222.25. You might choose to place a sell bet on this stock, which would be at the selling price of 221.15, staking £7.50 per point.
For this example, assume first that your analysis is correct and that the share price falls. Perhaps it might drop to 168.32 – 169.42, when you decide to close your bet and collect your winnings. As it is a short bet, it would close at the buying price of 169.42. With a starting price of 221.15 and a closing price of 169.42, it is an easy calculation to discover that you have made 51.73 points on your trade. As you staked £7.50 per point, you have won £387.97.
For a different aspect of the trade, assume now that the bet failed, and that the stock price rose. Perhaps you would choose to cut your losses and close the bet when the price is at 263.60 – 264.70. Once again, the bet closes on the buying price which in this case is 264.70. 264.70 minus 221.15 is 43.55 points, which for your chosen size of stake is a loss to you of £326.63.
As a third alternative, perhaps you would have placed a stop loss order when you took out the bet, just in case you could not keep your eye on the price all the time. The stop loss order closes your trade if it reaches a certain level of loss. In this case, the trade might have closed when the price rose up to 249.65 – 250.75. With a closing price of 250.75 and an opening price of 221.15, it you would have lost 29.60 points by using a stop loss, which would cost you £222.
Invensys Futures Style Bet Style Bet
With an eye to the midterm, you might choose to place a futures style bet on Invensys, wagering that the price will go up in the next few months. The price for a far quarter futures bet is 221.66 – 224.34. Your long bet would go on at 224.34, so suppose you staked £5 per point.
Perhaps this time the price rises as you hope, and you wait until it reaches 273.62 – 276.13 before closing your bet and collecting your profits. The bet would close at 273.62. With an opening price of 224.34, the difference in points, the amount you gained, is 49.28. Multiplying by your stake of £5, your winnings work out to £246.40.
Even though this is a futures style bet, you can close it at any time if it reaches the profit level you want, or alternatively becomes a loss that you want to curtail. If the price dropped to 184.37 – 187.03 you might choose to cut your losses. The starting price was 224.34, as before. The bet closed at 184.37. 224.34 less 184.37 is 39.97 points. For your chosen size of stake, this is a loss of £199.85.
Many spread betters find it useful to place a stop loss order on their open trades. You can do this when you open the bet. You can choose what level of loss triggers the stop loss order, then your broker will close the bet for you if that is exceeded. It saves you having to keep in touch with prices all the time. In this case, perhaps a stop loss order would have saved you some money, closing the bet when the price dropped to 195.46 – 198.12. With a starting price of 224.34 and a closing price of 195.46, you would have lost 28.88 points for a total loss of £144.40.