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Top 10 CFD stocks for the week

Which stocks are CFD traders targeting? Anthony Anderson, head of CFDs at MF Global gives us the top 10 stocks to go long and short

By Expert Panel | 08.03.2010

By Anthony Anderson, MF Global

In a market that lacks direction, the key strategy for CFD traders is to buy stocks that fall heavily and short stocks that rally aggressively. Bluescope Steel, for example, is a popular shorting stock while QBE Insurance and Toll Holdings are popular candidates to long.

QBE released its 2009 result and guidance for 2010, which were below consensus in most key areas. Unperturbed, traders were keen to focus on future prospects and started accumulating the stock after it dropped by around 15%. Macquarie has retained an outperform rating on QBE based on healthier projections for 2011.

Like QBE, TOLL is another company that had a disappointing result. The stock fell over 20% at its worst and traders thought this was probably enough. Macquarie also upgraded the stock to "outperform" on projected earnings in 2011 - which was enough to inspire longs.

ANZ is trading at 5 month highs with $24-25 level proving to be a formidable top. In line with the aforementioned strategy, traders are shorting before that level.

If you're a little unsure of the terminology, when you go 'long' a CFD, you profit if the price of the CFD rises (you buy the CFD in the hope that when you come to sell the CFD at a later date, the share price of the underlying stock has risen).

When shorting a CFD you profit if the price of the CFD falls (you sell a CFD, in the hope that when you come to buy the CFD at some time in the future, the share price of the underlying stock has fallen).

Take a look at the top CFD stocks targeted by traders below plus the reasons why:

Long positions - Top 5 (24 February - 3 March)

Ranking	Code	Stock	Position Held	MF Global's Commentary
1	QBE	QBE INSURANCE GROUP LIMITED	Long	QBE released a 2009 result and guidance for 2010 which were both below consensus in most key areas. Macquarie however retained outperform rating preferring to focus on 2011 prospects. Traders were keen to focus on future prospects and were accumulating the stock after 15% drop.
²	^BHP	^{BHP BILLITON LTD}	^Long	Stock now trading ex-dividend. BHP has seen a rise in copper prices post Chile earthquake and this has helped support the stock. Credit Suisse sees value in resource sector and in particular BHP & RIO.
3	NAB	NATIONAL AUSTRALIA BANK LTD	Long	NAB says its strategy of matching previous RBA rate rises has led to its mortgage volumes soaring. The market viewed this as very positive and traders are keen to accumulate the stock.
4	RIO	RIO TINTO LTD	Long	Divestments reach $10,000,000,000.00. Company very well re-capitalised. Market likes how well the company is placed going forward.
5	TOL	TOLL HOLDINGS LIMITED	Long	Like QBE, TOLL is another company that had a disappointing result. Stock fell over 20% at worst and traders thought this was probably enough. Macquarie upgraded to "outperform" on expected better performance in 2011.

Short positions - Top 5 (24 February - 3 March)

Ranking	Code	Stock	Position Held	MF Global's Commentary
1	RIO	RIO TINTO LTD	Short	Stock put in a solid week. Till it breaks above $75, traders appear happy to short and range trade.
2	CSL	CSL LIMITED	Short	Stock tried on roughly 6 separate occasions to break through $35 level. Till this level breaks, traders appear happy to continue shorting.
3	ANZ	AUST AND NZ BANKING GROUP	Short	Stock trading at 5 month highs. $24-25 level has proven formidable top over the past year and traders are shorting before that level even after a very strong market update.
4	BSL	BLUESCOPE STEEL LTD	Short	Traders keen to buy stocks that fall heavily and short stocks that rally aggressively. This is as the overall market lacks any real direction. Bluescope falls into this category as did QBE and TOL in the long section. BSL put in a base at $2.40 however after a quick 10% rise traders started shorting.
5	WES	WESFARMERS LIMITED	Short	WES had a solid technical bounce early in the week on no new news. More aggressive traders appeared happy to short the stock as it nears $33 resistance levels.