Weekly game plan 1 November 2020

Thinking about the week ahead and the craziness that is about to unfold with the US elections, my initial thought was that there would not be too much to do. In fact, I’d been planning to basically just put out a warning about this week and recommending that we just keep it small and keep it tight. To a large extent that is still what I am doing, because it’s going to be wild out there. Regardless of what happens, or in which direction it will be, it’s going to be a volatile and unpredictable week. To reiterate the comments on the International outlook blog last week “There is no edge in trying to figure out an election result for a trader“. Therefore, it is probably best to sit this week out, or at the very least trade smaller and with wider stops. There might be some huge moves, there might be some great chances… but there will always be more chances and other moves. Our job is to only play the game when we can skew the odds in our favour. When things are murky and wild, we’re better off missing out than losing money.

That said, there are some charts and ideas floating around inside the HCA trading community that are worth sharing. Just keep those stops tight and the trades small. The money is made by being around long enough to capitalise when it’s easy, and allowing the market trends to do the work.

S&P500 (SPY)

The neckline of that Inverse Head and Shoulders broke and the SPY find itself scrambling for support around $320. Could be a nice range trade here, but it could be even better to buy sub-$305. News of a fresh UK lockdown might gap markets lower. The $320 level will be key I think. In the medium-term it’s likely that markets will rally as regardless of who wins the US election, money will be printed. In the short-term though, a shock caused by election results combined with UK and EU lockdowns could create some chaos and see this market come off a quick 10%. That is a lower low after all. $320 needs to hold or we’re looking at a test of $300.

Nasdaq (QQQ)

The eye of Sauron!? It’s tongue-in-cheek, sure… but this lower high / bull-trap formation actually has a pretty good track record of picking tops. Maybe just down to the 200 day moving average at $243?

VIX

Keeping an eye out for that 50 level on the VIX for a signal to stay out and wait for a term structure inversion and a buy signal. Things might get a little crazy in the weeks to come.

Dollar Index (DXY)

DXY turned around and bounced off that trend line making a higher low and a new swing high. Perhaps once the election result is out the way, the USD can strengthen into the end of the year? What happens if the FED prints another $3tln? Will the devaluing effect of more stimulus be outweighed by the confidence and greed created by a Trump win, at least in the short-term? I guess we’ll find out.

USDZAR

R16.10 to R16.20 is a key support zone for the USDZAR. Some more USD strength would be nice, but we will have to break that level first. Risk off could work against us here.

Gold

The bear flag is broken and the 200 day moving average looks in sight.

Brent Crude Oil

New lows. Sentiment is getting extremely bearish on Oil and seasonality is working against it too. Perhaps we’ll see it bottom by the end of November, but for now it seems to be heading lower.

Bitcoin (BTC)

The full target for this Inverse Head and Shoulders is around $16k. Multi-month patterns take many months to work out. Daily and weekly charts for reference. My call remains the same: ridiculously new highs in December 2021.

Woolies (WHL)

Coming back to test the 200 day moving average (and the 50 day moving average). Maybe a decent long-term entry here for those who missed the bus. Risk off globally could drive it down to the trend line around R32.50, so just be careful to not get too big too soon.

Vodacom (VOD)

It just can’t seem to break free here. Sellers stepping in above R125 and driving it lower again and again. If the sellers can’t get it to hold below R120 though, it won’t collapse. The fight for the 200 day moving average is still very much on.

Telkom (TKG)

And below all the moving averages again… but still in the consolidation. Bias is still long. Patience is needed.

Standard Bank (SBK)

Provided the US market doesn’t melt down, this SBK setup is looking decent for a long on the swing trading account.

Shoprite (SHP)

Kind of in the middle of nowhere right now. If we get a chance to pick up stock sub-R120, that would be great for a medium to longer-term long position.

Sasol (SOL)

R74.50 (ish) is a rather important historic level. Will it act as support here, or does a lower oil price drive it even lower?

Nedbank (NED)

NED looking similar to SBK. Interesting convergence of support (trend) lines. I still like banks in general and this offers a great risk-reward for short-term. Still a little early to trigger the long-term buys though.

MTN (MTN)

Sellers stepping up to the plate above the 20 day moving average. If we get a risk on theme after the US election and the market gets going, MTN could crack the 200 day moving average and get a move on. Watch the swing lows of this rounding bottom though. That would be the stop for any long trades taken here now. That bear flag has not been invalidated yet.

Mondi (MNP)

From “this could be a fakey” to “bombs away” in a 5 seconds flat! Now it has to hold R301 or it’s at risk of forming a down trend. High risk-reward here for the brave though.

Impala Platinum (IMP)

Fancy a bounce to the top of the range, anyone?

Growthpoint Properties (GRT)

GRT down trend – 2.
Those hoping for a trend change – 0.

Once again, the new low is concerning. Surely this is getting a little overdone now though?

FirstRand (FSR)

It’s a range-trade-o-rama! Looking similar to both SBK and NED. Start buying banks slowly.

Discovery (DSY)

Alright, target hit. Now DSY needs to form a base around this 200 day moving average before we can discern what comes next. If you’re still short, now is the time for trailing stops.

British American Tobacco (BTI)

Looking for key support around R495 to R500. There is also a R40 dividend on the table. This one might be worth buying.

Bidvest (BVT)

Support at R130, resistance at R150. Range trade city?

Barloworld (BAW)

The Inverse Head and Shoulders setup from last week failed to trigger and took out the right shoulder, thus is off the table. Back on old support at R57… resistance around R68. The range of my knowledge of puns is vast.

Aspen (APN)

It’s made a small pennant over the last two weeks. Trend continuation pattern, still looking for R100. Better not to chase here if you’re not already involved.

BHP Billiton (BHP)

R302 doesn’t have to hold, but it could and if it does, it’s a great risk-reward, counter trend setup. Remember to keep it smaller because it’s against the primary trend.

Exxaro (EXX)

Break of the R125 level was a great short trigger for us this past week. From here, not really sure if there is a setup unless we get a chance to buy it off R101.

Tiger Brands (TBS)

So that wedge formation is working out and now we have to ask ourselves if we’re going to buy some at the midpoint between the 20 and 50 day moving averages, or if we’re going to wait for a retest of the neckline (orrange) before we take longs again.

*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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