Weekly game plan 9 August 2020

The past week was a rather strange one to be honest. There does not seem to be too many good setups around at this stage, and the only relatively attractive setups are slightly longer-term in nature. That is, on a swing trading basis were trades are taken for a number of weeks, rather than just a few days or hours. There was of course the news that U.S. President Trump signed an executive order to provide further coronavirus relief directly to US households. This will not only be in the form of $400 weekly cheques, but in general the orders are aimed at providing jobless aid, suspending some payroll taxes, halting eviction and assisting with student loans.

S&P500

We’ve been making use of both the SPY ETF and the futures contract to track the S&P500 for some time now. By the looks of things, new all time highs are but a stone’s throw away. Unless there are some major bearish catalysts that crop up, there is no sense in better against the bulls here. The price action, as depicted by candlestick patterns, seems very strong.

USDZAR

Looking at the USDZAR, it seems pretty obvious that it’s bounced off a support level (that was historic resistance) and has broken a down trend. It looks like a breakout and ZAR bears can call targets all the way up to pandemic-panic levels.

To get a better idea of what will most likely drive the USDZAR in the immediate to near-future, we have to look at the Dollar Index (DXY).

DXY

Here we start by looking at the weekly chart. We see that the Dollar has been weakening drastically, mostly likely driven by massive quantitative easing measures taken by the Fed. Now though, we see that the Dollar is starting to hit some support on a longer-term horizontal support level.

Looking at the daily picture we see a nice consolidation (rectangle) around the support level identified on the weekly chart. The directional break of this consolidation will give us guidance on what the immediate future will hold for the Dollar.

Given the news this weekend, we think that it’s likely to see a break lower and more Dollar weakness. This of course would reverse the weakness we’ve seen on the ZAR and be supportive of commodity prices. A break higher from this consolidation and a move toward the 50 day moving average would worsen the outlook for the ZAR and likely result in heavy pressure on the local baking stocks.

Gold

Our current thinking is that we will likely see risk assets at large (which include Gold, Equities and Crypto’s) performing well in the foreseeable future as all the newly printed money around the world is worked into the financial system. Our thesis here is around the absence of inflation while central banks brrrrrrrrr. Basically, the money and inflation has to go somewhere, and we think it is going into these assets.

In the very short-term though, we note a bearish candle formation that could lead to a pullback in the price of gold. The bearish engulfing candle takes back two days of gains and is generally considered a rather strong bearish reversal signal. Whether or not the news of further Fed action this weekend will nullify this formation on Monday is to be see (we think it might).

Bitcoin

Nice inverse head and shoulders setup here on BTC. It’s broken out already, although looks like it is trading up in ‘steps’. Looks very strong.

AngloGold Ashanti

ANG target our target and turned around. Perhaps we can buy it again off the trendline?

Glencore

GLN broke out nicely. Perhaps it’s giving a second chance for a buy order floating around the 200 day moving average?

Bidvest

We’ve sold some BVT off the resistance level indicated with a stop loss around R145.00 and a target price of R105.00, then R88.50. This trade triggered some time ago and is retesting support/resistance and might be giving a second chance for a higher risk-reward setup.

Imperial Holdings

IPL is now forming a falling wedge it would seem. For now our bias remains bearish, unless the falling wedge is broken to the upside.

Clicks

Perhaps a bear flag setup on CLS? We note bearish divergence and signs of bearish momentum. Good risk-reward setup here.

ABSA Group

It looks like the bear flag has broken here. We see potential support as marked on the chart below. A break of R73.29 targets R63.30.

Anheuser Busch Inbev

This looks like a fairly strong setup on ANH. We would like to see it get above the 200 day moving average and start to trend a little.

FirstRand

We were long here, but were stopped out. Seems like the bear flags on the banks and other financials we’ve been tracking are all starting to play out. Further ZAR weakness will likely add fuel to the fire.

Old Mutual

Nice high risk-reward setup here on OMU on the short side.

*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.

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