So the trade deal is all but done. Markets rallied hard on the news that a phase one deal between the US and China will be signed. Late Friday night there was some news flow around the signing of the deal in early January and tariffs being reduced on a large number of products. We also heard rumour around the size of agricultural purchases China will be making from the US going forward, although authorities said that no details will be publicly shared for some time. Something to watch out for was Kudlow making some rather stern comments around more tariffs if China does not sign. As things are now though, it seems that parties are clearly communicating that a phase one deal has been made. Another rising flag was news flow around the US imposing 100% tariffs on EU products, so we will have to keep an eye out for potential fallout, although overall the US-China news could still override sentiment for the week.
Overall, should bullish sentiment remain the theme for the week, it is very likely that the Rand strengthens and even that emerging markets outperform developed markets for some time to come.
Textainer is a new listing on the JSE (Trencor is unbundling their TXT shares as well). Given the good trade war news and the impact that could have on global trade, it is rather likely that Textainer will benefit directly as it is a large player in the shipping container rental business. There is no real chart available for the JSE listing just yet (not enough data to make an analysis), but we can look at the NYSE listed equity to give us our lead. There is a potential bull flag setup that would break the stock out of a longer-term down trend. We will be watching closely to see if we can get a confirmed break out as there is a potential target around 27% higher.
We have been tracking RNI for a while. The last time we looked at it we were looking for a consolidation above R285. The stock did not manage to do this. Since then the Rand has strengthened and with recent news is expected to keep strengthening. We’ve also identified a possible head and shoulders topping pattern on the daily chart. Moreover, bullish momentum seems to have petered out. We will be watching for a break lower out of this formation.
Another stock we’ve been watching for a few weeks is MRP. We are looking for price to hold above R184 in order to go long to a potential target of R205.
AGL is not so much a new idea as it is just managing an open trade. The stock has broken out of the bull flag formation we identified last week and looks set to make target. The close on Friday has made things a little more interesting though. There are two ways in which it can play out from here we think.
First is that we saw a breakaway gap happen on Friday. The stock has cleared a significant recent resistance level and made a new high in the process. This is a very bullish signal and indicative of a sustained rally to come.
A potential scenario that could get us out of this trade and even bode as a bearish signal, would be if AGL gapped down below the resistance level on Tuesday morning when the market opens, doesn’t manage to close the gap and closes on the lows for the day – being close to the lows of Thursday. Should that happen, it would have made a perfect shooting star formation – complete with volume spike. We think that this is a low probability outcome, but if there is some shock news around the trade war, Brexit or any other severely negative news before our market opens on Tuesday, this could be relevant.
We got SAP wrong a few weeks ago, anticipating a bearish move from a flag formation. As it turns out, the stock did not trade lower and is now looking as if there is a potential medium-term trend reversal happening from significant long-term support. Also, for the first time in a very long while the stock looks to have broken its down trend.
In order for us to be convinced that this is in fact the case, we would like to see the stock consolidate between R47 and R60 before breaking higher. In the shorter-term there is a potential long trade to the top of the indicated range if we can see a confirmed break out of current resistance.
*Please note that these trade ideas for part of a larger weekly plan and the value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. The risk of loss arising from trading in Contracts for Difference can be substantial. You should carefully consider whether such investments are suitable for you in the light of your circumstances and financial resources.
Herenya is often invited to make presentations at public events. We have created a page where you can download our presentations if you would like to go through them in your own time. Go have a look, you might find something useful!
We’ve added a market data page on which we have selected some of the indicators that we feel are worth staying aware of.