Weekly game plan 25 October 2020

Generally markets are feeling fairly good going into next week and the weekly game plan is centered around buying some pullbacks in the banks and avoiding long positions in resources and precious metals. We have been seeing good old fashioned sector rotation locally, with funds flowing into banks and retailers and seemingly local property as well. This is likely being driven by investors looking for value, of which there is much to be found among the ‘locals’.

S&P500 (SPY)

SPY managed to test the support and the short-term moving averages and managed to put in a bit of a bounce. As it stands, our bias is toward new all time highs on this index. Be warned though, US election volatility is coming.

Nasdaq (QQQ)

The makings of a bull flag, on the inverse head and shoulders neckline, and supported by short-term moving averages.

Dow Jones Industrial Average (IYY)

Similar setup to the charts above. The setup looks constructive (bullish).

Philadelphia Semiconductor Index (SOX)

As long as it stays above the 20 day moving average, our view remains bullish. Remember, this is a leading index for the Nasdaq.

Dow Jones Transportation Index (DTX)

DTX is managing to hold above the previous high (now support). Another break higher would be very bullish for equity indices in general.

Brent Crude Oil

The consolidation below the trend line resistance is still intact. We’re watching for a break out of this down trend, although we are mindful of Oil seasonality around this time of year.

Gold

Gold still in the flag formation and once again testing the bottom of it. Be careful out there, a break of this flag could see gold testing that 200 day moving average pretty quickly.

Dollar Index (DXY)

Once again we look at two charts on the DXY. The first (left) indicates what we think could be a bear flag breaking lower, which is indicative of a prolonged period of a Dollar weakness. The second (right) shows that the inverse head and shoulders neckline failed at act as support. Our base expectation here is that the DXY first tests the bottom of the rance as indicated in the second chart (right). From there we will have to see if it finds support or fails. Further stimulus from the US will drive these charts lower.

USDZAR

Once again looking at the weekly chart. We note that the 50 week moving average has broken. Should we see USD weakness as indicated above, we’d expect for the USDZAR to firm up towards that R14.50 level in the months to come.

Barloworld (BAW)

The makings of an inverse head and shoulders. Has not triggered yet, but could provide a good trading opportunity in the week ahead.

Woolies (WHL)

We’ve been tracking WHL for a while now and are getting close to our first target. There are targets higher up, all the way to R47. We’d be interested in buying pullbacks in WHL (as well as other retailers).

Vodacom (VOD)

We’ve added two VOD charts to allow us to illustrate a little more clearly. the range that we’ve been watching has been broken, and both the MACD and Stochastic is looking rather bullish. A final confirmation of a long here would be a move of the MACD line above 0 and a push above 80 on the Stochastic. It is still a relative underperformer, although in general this stock is looking better and better every day.

Tiger Brands (TBS)

Although this stock is now under a long-term (equity) buy condition, we think the short-term trend has gotten a little steep. We note a rising wedge and think a short-term pullback (and retest of the breakout) is possible here.

Telkom (TKG)

TKG is looking solid above all it’s moving averages. A bullish break of this consolidation could be a buy signal for those who are not in the trade yet.

Sasol (SOL)

A nice bounce off the de Mark or Williams point of resistance (now support). We also note signs of momentum starting to turn bullish on oscillators, although would be more comfortable once the MACD line and its signal line crossover.

Remgro (REM)

REM is looking rather good to us. Short-term bullish moving average crossover, trading range broken to the upside and a potential inverse head and shoulders looking like it’s broken higher too. Initial thoughts here are to look for price to test the 200 day moving average and then potentially to close the gap.

Redefine Properties (RDF)

Looks like that bullish bounce to the top of the channel is underway. We noticed an exact triple bottom as well. Needs to get above 50 day moving average and recent de Mark or Williams point of resistance, then it seems to be clear skies to R3.60-ish.

Mondi (MNP)

A bit of a confusing picture here. Market in black is a primary uptrend, and a bull flag in that uptrend. Price broke below the major trend line though, which is rather concerning. Although, marked in red is a falling wedge formation which usually resolves bullishly. Perhaps we saw a fake break below the major trend line to suck in the bears before a major bullish reversal?

Kumba Iron Ore (KIO)

Mining is not the flavour of the day anymore and that looks like a head and shoulders formation on KIO.

Growthpoint Properties (GRT)

This time it managed to close above the trend line. This would still be an against the trend trade, so half size and tight stops.

Goldfields (GFI)

GFI looks like it’s dead. 200 day moving average support is up next.

Clicks (CLS)

Retailers pushed really hard on Friday last week. Another strong push into that overhead resistance could be a high risk short setup on CLS.

*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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