Weekly game plan 12 January 2020

Last week was somewhat unexpected, at least in the sense that the recent tensions between the U.S. and Iran have mostly abated. Markets shrug off the fears that they had and the U.S. went back to making new highs. The bull is strong and alive. S.A. however hasn’t seen a bull in so long, most of us have forgotten what they look like. We’ve had continued issues around Load Shedding and various other economic ailments, and thus our Rand has weakened somewhat. This weaker Rand narrative is what we think is likely to drive our market in the coming week. Things can change fast, as we saw with Gold stocks last week, so we are actively staying open to the idea that should we see good news coming from Eskom, our plan might need to adapt or change.

USD/ZAR

So a weaker Rand narrative, yes, but we still see that R14.50 level as a tipping point. Should the Rand trade up to that level and reverse significantly from it, our bias will shift to being bullish on the Rand and likely S.A. Inc. stocks too. Should that level not manage to hold down the Rand and it trades through there, we would see that as a catalyst to significant weakness in the Financials and Retailers sectors on our Market. We note that momentum is currently in favour of Rand weakness and a move toward R15, thus our bias for weakness in this coming week.

Weekly game plan 12 January 2020 USDZAR

Absa Bank Group

Not only is ABG a relative underperformer, it is also looking fragile in the face of potential Rand weakness. We note that the stock took out the R145 support level, retested it and seems to be confirming a bearish move down to an older support level at R136. We think this trade offers a decent risk-reward and is in-line with the trend.

Weekly game plan 12 January 2020 ABG

Richemont

CFR is looking rather interesting here. Momentum wise, it has no clear direction. Perhaps the weaker Rand could give it the push it needs to start trending higher again? We are not rushing out to get involved here, but we are watching the MACD for a bullish push, as well as keeping an eye on that trend-line for a potential bullish bounce. No real trade yet unless it could get above R115 with signs of momentum in its corner, but for now something to watch and be aware of.

Weekly game plan 12 January 2020 CFR

Mondi

MNP is ranging between R330 and R260 (larger range) and seems to have triggered a short move down to the bottom of the range. Relatively speaking it has also just recently started underperforming and from a momentum perspective things seem rather bearish as well. We like the clear stop loss level and the good risk-reward ratio of this short setup.

Weekly game plan 12 January 2020 MNP

MTN

MTN has been under fire for some time. We had open shorts on the stock until last week when news broke that the $1.3bn fine it was facing from tax authorities in Nigeria has been set aside, at least for now. We also saw a de-escalation of U.S.-Iranian tensions. It is like all our reasons to be short the stock (except the pending investigation by the U.S. Justice Department regarding terrorist funding allegations) have evaporated before the sun. Give the history, we are not really convinced that MTN is the kind of stock that we want to own for the long-term, but we have to be open to the potential short-term opportunity this ‘relief’ will bring. It appears to be presenting a bull flag setup with targets at R90.70 and R96.50. That said, there are still a number of worms in the woodwork here, so taking longs in our view is still very risky.

Weekly game plan 12 January 2020 MTN

Netcare

Perhaps a slightly longer-term play, but NTC is looking rather good for a long trade. Of course the current tightening consolidation needs to break first before the trigger is valid, as well as a bullish move from the MACD, but overall we like NTC for a medium to longer-term long.

Weekly game plan 12 January 2020 NTC

ALSI

The ALSI is still rather range bound, but it seems that bullish momentum is waning rather fast. We are looking at a range break as our trigger, with a current bearish bias. We note momentum shifting to the downside and trade targets around 40 000. That said, we wait for an indication of direction from the current trading range before we make any calls.

Weekly game plan 12 January 2020 ALSI

Shoprite

SHP has given a bearish candle formation, on a key support level, with bearish momentum present. Given the weaker Rand narrative, we think this stock presents a great shorting opportunity with a clear stop loss and a first target price of R110, potentially lower given the trend of the stock.

Weekly game plan 12 January 2020 SHP

*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.

1 thought on “Weekly game plan 12 January 2020”

  1. From the HCA trading team:
    D: Don’t forget about the retailers having updates this week. MRP TRU TFG and WHL should all have trading updates. Could impact that SHP idea.
    J: Yes and CFR update.

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