Weekly game plan 19 July 2020

One of the things that we’ve been thinking about over the last few weeks is; the past. Back in 2010 there was an enormous amount of fear around the possibility of a double dip recession. Fundamentally, at least to our understanding at the time, it all made a lot of sense. Nobody could believe that the market would trade higher, or that the economy would recover. Most of the analysis going around back then was of the view that the damage done to the economy would be long lasting. Then, like now, the Fed printed enormous amounts of money. What followed was ‘the most hated’ rally and a lot of talk about ‘kicking the can down the road’. Fear for the consequences of just printing money and the even bubble that would create… eventually subsided. What followed was the longest bull market in history.

We find ourselves wondering how similar this current situation is to the one back in 2009/10. Could the monetary stimulus just refuel the rally and keep the market (first) and the world economy (second) pushing higher and harder? Possibly, yes.

We’ve noticed that shipping lines are fully booked until September. Read it again if you must. Hard to believe, but whether we choose to accept it or not, international trade is coming back in a big way and demand for commodities is rising. Sure, much is going to be different now. Once profitable companies will go bankrupt and new types of businesses will become leaders in industries we’ve not even thought of yet.

That is the nature of progress and adaptation though. The question we’re grappling with is; are we going to recognise when the landscape is changing and are we going to be able to identify new opportunities in a new world?

Some deep thoughts for another day. Now let’s look at some charts.

S&P500

We’re looking at two charts again this week. The first being the chart of the SPY (S&P500 ETF. We’ve now got a clean break and hold above the downtrend line as well as a filled gap and a golden cross. All that remains is the previous point of resistance needs to be taken out, but overall this setup is looking good for higher prices.

The second chart is more representative of SPX futures. We note very similarly strong looking setup, and again the previous resistance (as indicated by the grey range) is still intact at 3238. Once again, not many reasons to be short this chart. The potential for a double top is there, but in all technicalities will only be confirmed once (or if) the bottom of the grey range is breached at 2936. Therefore, the view for now, is bullish.

USDZAR

This chart is probably not all that helpful, but our view is that we likely see more ZAR strength and a continued push towards that R16.00 level. We think this will mostly be driven by USD weakness.

Anglo American Platinum

Right back up to previous highs, with a flat top triangle forming. Looks constructive for a long.

Goldfields

All looks well an on its way to target.

Harmony Gold

It closed the week at the highs. We’re not betting against this. It likely trades ever higher.

AngloGold Ashanti

Cup and handle, or maybe even Inverse Head and Shoulders, or even just a rectangular consolidation… target for all three is R635.00.

DRD Gold

It’s run really hard, but it keeps making higher lows and has been a relative outperformer for a long time now. If you’re a trend follower, the place to be is long.

Jubilee Metals Group

JBL has been trading in a range for a rather long time. It would be great to see it trade up through R1.00 and start a new, upward trend.

African Rainbow Minerals

There are a few ways to look at resistance levels. One is to look at where the candle real bodies are and to base resistance levels off those. The other is to use the de Mark or Williams points of resistance. If the latter is used, this setup has not triggered yet. If the former is used though, this setup is a long. Guess it all depends on how you like interpret it.

BHP Billiton

This one looks a little more clear. The de Mark or Williams point of resistance is clearly broken here.

Kumba Iron Ore

Not so long ago we were looking at a trendline break on KIO. We were wrong. We now look at both the weekly and daily charts and see the potential for a break higher above the current, rather significant resistance.

British American Tobacco

BTI looks interesting. First it faked out the top of the range and now it is heading back toward the bottom of it. We see no high probability trade here at the moment.

Bid Corp

So far so good, although we would really like to see the stock break the support zone around the 50 day moving average and bear flag support trendline. If that fails, it’s bombs away. If it holds, the shorts are off the table.

Imperial Holdings

IPL still looking like it wants to break this support level.

Bidvest

We’re watching what we think could be a bear flag formation. The support level here is key.

Telkom

Is this a tiny bull flag… or a cup and handle? Does it push to the next resistance level at R47.90? It’s a valid setup, so let’s see.

MTN

MTN broke the triangle formation and is well on its way to the 200 day moving average.

Blue Label Telecoms

A few things happening here; higher lows, golden cross, a long history of trending outperformance. We like this for a long.

Truworths

The long setups in the retail sector mostly failed. TRU is now starting to look like it could be breaking a bear flag. For longer-term context we added a second chart.

Mr Price

Another broken bear flag on MRP.

Clicks

The resistance level holds strong.

*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.

Advisory services

We’re happy to announce that we now have a registered tax practitioner as a part of our team. Well, he’s been with us for a few months already, mostly doing tax clearance certificates for crypto arbitrage traders, financial emigration for individuals moving overseas, as well as, the odd intercompany loan agreement for some companies in the startup space. Thing are off to a good start in that space and we recently posted the first of what will be a monthly blog under Tax insights. We hope that the information contained in the Tax toolkit for 2020 post will help both traders and investors with more efficiently compiling and submitting their annual tax returns. Of course, if you would like for us to help you with your tax affairs, you are welcome to contact us.

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