I would seem that our bullish outlook last week was half-wrong, half-right. The local market was unfortunately not as strong as what we had thought it would be, although U.S. markets seem to be on track with what our expectation was. That said, the SARB did cut interest rates by 1% unexpectedly which has a somewhat negative outcome for the Rand and consequently our local market. To be rather honest, our outlook has not really changed all that much from last week until now. We still largely expect the local market to trade a little stronger, the Rand to firm up and U.S. markets to trade up to resistance.
One of our traders pointed out to us that Gold is about halfway from reaching an Inverse Head and Shoulders formation target that broke out a while ago. In the meantime it has been trading higher in nice steps, by making bull flag setups and bouncing off the 50 day moving average. It seems highly probable to us that these bull flag patterns will keep repeating themselves until the Inverse Head and Shoulders target is reached. This, we think, will likely create a number of trading opportunities over the coming weeks.
The SPX target range we pointed out last week has almost been reached. Time will tell if it now actually pushes into the resistance zone and if so, whether or not it turns around the 3000 level.
The trend line that the USDZAR broke last week is being tested. Perhaps, without any unexpected catalysts this week, the move towards strength can start in the coming week?
This is an interesting setup to us that we think provides a great risk-reward short trading opportunity. We note the presence of bearish divergence between the stochastic oscillator and price. We also note that the MACD might provide us with another short signal if price does turn down in the week ahead. The only real concern we have with shorting this stock back to the target zone is that it is a relative outperformer. Thus we are only willing to take half risk on this trade.
Our strategists have picked up an Inverse Head and Shoulders formation on AVI. We note that the stock managed to get above the 50 day moving average. Should this stock break the resistance indicated, it could provide a great risk-reward long trade.
This is a similar setup to some of the setups we pointed out last week. This rectangular consolidation on LBH could potentially break higher with a move to the 50 day moving average, or potentially higher. Something worth keeping an eye on in the week to come we think.
Similar bottom pattern scenario as what is being seen on so many stocks in the local market at the moment.Our strategists pointed out that SUI however, has made three consecutive higher lows. A break of resistance could see the stock testing the 50 day moving average.
*Please note that these trade ideas form 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.