The news this past weekend has been dominated by the Coronavirus. It seems that the rate of infection is accelerating and that it is managing to reach other countries, with both Japan and Australia confirming cases of infection. U.S. companies are shutting down operations in affected areas and evacuating citizens. The situation is serious and thus it is very likely to negatively impact markets in the week ahead. Also worthy of note is that margin requirements for Palladium futures were increased over the last week and thus we saw a large negative move from the commodity, which of course created rather large down moves on the platinum stocks locally. With higher margin requirements and prices coming down, we could see a cascade of stop losses being triggered in the already illiquid Palladium futures market, which will only make things worse in the very short-term. The question is then, will it present us with a good chance to get in on the trends that rallied so hard last year, or is that the end of the rally?
The U.S. market has been incredibly strong over the last while. Christmas is now far behind us and there are many negative and scary catalysts in the market. Although we have no real immediate plan here, we will be watching the short-term trend line indicated in pink on the chart below as a potential short trigger. Yes, it is firmly against the trend to even be thinking about taking shorts here, but if that trend line cracks and it gives us a nice 10% to 15% pullback, we would like to be involved.
The Rand can be a tricky little monster to trade. Right now, many are seeing the same picture. Key resistance, rising wedge, bearish setup… which of course will translate into a stronger Rand and likely some relief for the Retailers and Banks. Although this does look like a very likely scenario for the coming week (considering that results coming from the retail space has been better than expected and WHL is due to report on Monday), we are cautious about the Coronavirus situation in China. We do not know how much fear it will create and we do not know what affect that fear will have on equity markets or currencies. If we see strong ‘risk off’ sentiment next week, this USDZAR chart setup could very, very quickly be nullified. Nonetheless, as things stand now, Rand strength looks (at least technically) very likely.
Oh the great 2019 rally of IMP! Has it actually come to and end? Explained earlier, we saw an increase in Palladium futures margin requirements… which could create a bit of chaos if a cascade of stop losses are triggered. A stronger Rand would also hurt. We’ve been bullish here for a while, and still fundamentally are in the medium-term. That said, in the short-term, if that support level indicated at R133.89 does not hold, we do think it is very likely that we see IMP trade down to at least that pink trend line (with support coming in around R110-ish).
Anglo American Platinum
We’re not going to elaborate here too much as the situation is the same as with IMP. We had a bullish setup on AMS last week though, that failed rather spectacularly. Luckily there was no trigger to go long, so we dodged a bullet. The question we are asking ourselves now is whether or not AMS becomes a buy if we see that blue trend line hold and there is evidence of a bullish setup emerging around that support. Something to keep in mind over the next few weeks.
RNI has been making these step like setups for some time now. It seems to us that its broken another rectangle consolidation, came back to test the resistance as support, and managed to hang onto the gains. It is a strong outperformer and if the Rand weakens it will likely have a rather strong tailwind. We like this setup as it has clear risk-reward and a decent looking trend in place with growing momentum in place.
In the short-term it looks like BTC has not managed to get above the $8900 level. Momentum has shifted down and the bearish trend seems to be firmly in place. This is a complex instrument, so we will not go into the entire theory and story here, but to us it looks like there might be some short-term technical weakness in the coming week with momentum having shifted in favour of a bearish move as well as the overhead resistance proving to have held. We note that BTC has already triggered a short trade on both the daily and hourly timeframes with initial targets around the $7000 support level.
*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.
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