We suspect that over the next few weeks and months, mainstream media is going to get swept up in the ‘all about Bitcoin’ narrative and by this time next year it is likely going to be all anyone is talking about. It’s really not all about Bitcoin though. There are many other opportunities to be had in the market if you look for them. Which of course, we do.
On balance it would seem that there are more buying opportunities in the local market than there are reasons to be short. We need to be patient and wait for pullbacks though. More importantly, Thanksgiving sets off a number of seasonal patterns as well. We need to combine several of them for one trade.
The three main seasonal patterns are:
- Post-Thanksgiving bullishness: buy the market at the close of the day before Thanksgiving and hold into mid-December.
- The January effect: which used to take place in January, but because of traders front-running the system, it now takes place in December. Small caps outperform big caps during this time, so buy the small-cap indices (Russell 2000 – IWM, for example).
- The Santa Claus rally: which encompasses the last five trading days of one year and the first two trading days of the next.
We are entering into that time of year that these seasonal patterns will start to exert influence over price, so let’s be mindful of them and try not fight the market.
Offshore trade ideas
SPY seems to be stuck around this resistance level. Bullish momentum is starting to fade a little and the door is open for a move back to support $319.80. Nice high risk-reward on the short trade here actually.
QQQ still finds itself inside it’s consolidation as well. Signs of fading bullish momentum are also present. Perhaps a move down to support?
Dow Jones Industrial Average (IYY)
Somewhat similar to SPY, although IYY is currently above the key resistance. Nonetheless there are early signs of a momentum shift taking place here as well. This is not exactly the clearest sell signal, but it should be heeded as a warning to the bulls.
Russell 2000 (IWM)
The trend is solidly up here and as mentioned earlier, we are likely to see this index outperform its large-cap peers in the short-term. Should we see a decent pullback in the week ahead, buying IWM at $165 or below would be a good entry.
Brent Crude Oil
That trend line we’ve been watching seems to have been decisively broken. Our thesis around the oil market supply demand dynamic heading into 2021 might be starting a little early. A close above $46.50 would be rather bullish in our view. We also note momentum is turning bullish. The possibility of a lockdown driven demand side shock to drive prices down in the short-term is still there. In general though, oil is looking very attractive heading into the new year.
Gold is still trading in a falling wedge formation. There really is no setup to trade here at the moment. Perhaps we need some sort of fundamental catalyst to get it moving again?
Dollar Index (DXY)
We’ve been tracking the DXY for some time now and have decided to simplify our view a little. In essence we’ve expanded the range to the upside to accomodate for what many had thought was a breakout higher. The bear flag indicated a few times in the past is technically still in play, although we feel that this range is likely a more accurate picture of what is happening. There are two high probability trades available here now, which will both influence the ZAR (and thus our market) rather a lot. The first is to trade it back up to the top of the range with a stop just below 92. The second would be to trade the trend continuation should the bottom end of this range break and the USD weakens to complete the bear flag shown last week.
Not something we usually look at here, although it is interesting to note that the EURUSD has been range bound for quite some time. Range trading rules apply.
We’re putting up the daily and weekly charts on the USDAZAR again. The weekly still looks fairly good for a move towards the 200 week moving average around R14.50. On the daily chart though, we could see a bounce on the USDZAR back towards R16.16, depending on the whether or not the DXY (above) remains in its range or not. The gut feeling here is that given the recent sovereign downgrade deeper into junk and the potential for the DXY to bounce off the range bottom, puts the probability of testing the R16.16 level slightly ahead in the short-term. This does not invalidate the setup on the weekly chart though. It just means that the ZAR bulls need a little bit of patience.
All about Bitcoin… it would be nice to see a pullback into the $11k region for those that have been left behind to get a chance to get long. If patterns really do repeat themselves, we will likely not see $20k beached this year, but very early next year. Also, now that the FSCA proposed that Bitcoin be treated as a financial product, that finally opens the door for us to be allowed to expressly give financial advice on Bitcoin. We’re bullish. A break above $20k is worth buying, as is a retest of $11k in our view.
South African trade ideas
Anglo American Platinum (AMS)
Two tags of a significant resistance level which coincides with the 50 day moving average, price sitting right on both the 20 day and 200 day moving averages and wishy-washy-middle-of-nowhere momentum… feels like a short.
AngloGold Ashanti (ANG)
Our first attempt at buying gold stocks last week stopped us out on the same day we entered. Looking at ANG again this week, we once again have another high probability entry from inside the support zone. Tight stop loss on any long trades here as vaccine related news could easily spoil the party for gold and gold stocks.
Aspen Pharmacare (APN)
The aggressive trade here would be a long with a stop loss below the 200 day moving average. It might prove to be a bit too volatile for such a tight stop loss though, so a smaller position and a wider stop might be wise here.
Astral Foods (ARL)
We’re watching a break of the tertiary trend line and a potential short trade. Momentum seems to be on the verge of turning bearish as well.
BAW finally breaks out and looks very solid. Hopefully we see a pullback to R70 for another chance to get long.
BHP Billiton (BHP)
Stronger oil prices should be supportive of BHP. Interesting consolidation around the 200 day moving average. Very early days yet, but perhaps we could see a move back towards R420? Price has to stay above the 20 day moving average for that scenario to remain viable.
Clicks Group (CLS)
Entering into the short now will reduce the risk-reward on offer here, although momentum is turning bearish and the bottom of the range is starting to look like a price target.
CPI is hard to short because it is tightly held and illiquid. Bullish momentum is starting to wane and we’re watching that trend line on the MACD. A pullback here would likely only be into the area between the 20 and 50 day moving averages, or perhaps down to the 200 day moving average. Either way, you’re probably going to be better off waiting for a chance to buy it once the pullback is complete.
R101.02 opens up again as EXX breaks the supporting moving averages and momentum oscillators give sell signals.
It looked like there might have been a bull flag on FSR, although it now appears a lot more likely that we see a retest of this breakout and the 200 day moving average. A second chance to get onboard for the long-term trend change here?
GLN is back in the support / resistance zone that has proved to be so significant over the two years. We can treat this as a range breakout trade from here. What is encouraging is that the 20, 50 and 200 day moving averages are all moving into a bullish configuration now. Our bias here is currently long.
Growthpoint Properties (GRT)
GRT looking solid now. It would be nice to see it close the gap and trend higher, although the most probable outcome in the very short-term is that GRT retests the trend line break. Should we see that move take place, that would be a great long-term buying opportunity.
Kumba Iron Ore (KIO)
This head and shoulders pattern is not off the table just yet. The second shoulder is actually not that uncommon as this is (now) a complex head and shoulders pattern. A complex head and shoulders pattern is when either the left or right shoulder has two to three ‘shoulders’ and forms a rectangle consolidation, which is the currently the case on KIO. This doesn’t mean the head and shoulders (complex or simple) can’t fail, it just means that the pattern is still valid and can still be considered for a trade, should it trigger.
Life Healthcare (LHC)
LHC support level still in play. This could be a scary trade to take, although it offers a really tight stop loss and thus a good risk-reward.
Mr Price (MRP)
Waiting for a retest of the breakout and 200 day moving average could make for a great long entry.
Wait for the retest to finish. On first instincts, buying the 200 day moving average seems like the right way to trade this stock, although it could slip down to retest the trend line at around R100. Be patient and make sure you know where your stop levels are.
NTC bounced a little before it hit the support. Not sure that we would be chasing the long from here. If we get a chance to buy it off the support (R12.18) level, we’ll take it with both hands. we’re not interested in chasing this trade right now though.
Old Mutual (OMU)
Momentum on OMU is starting to turn bearish. It was rejected by the 200 day moving average as well. Moreover, we’ve seen some insurance companies be forced to pay out disaster related business insurance cover due to COVID induced lockdowns. Things could get a little dicey for the insurers. We don’t believe that this stock will get hammered into the ground though. Perhaps we get a chance to buy it off the 50 day moving average?
Redefine Properties (RDF)
It feels like a matter of time before that R2.50 level is broken and RDF grows some legs.
Potential long off the previous resistance (now support). Stay mindful of the potential for momentum to be turning bearish, although the clear, tight stop loss could make for a good trade up to the R112 region.
RMB Holdings (RMH)
Depending on how you plot resistance levels; real body closes, or tails and wicks – RMH has either already broken out or is literally on the level. We prefer the using the De Mark or William method of identifying key support and resistance levels and thus have the level market out as R1.32. RMH needs to break above R1.32 to get a move on. We’re looking for R2 in the medium-term.
Back to the bottom of the range for SAP?
Shoprite Holdings (SHP)
SHP has tested this support/resistance levels a few times. A break of the support could likely close the gap and test the 200 day moving average. Intraday time frames should be used for entry signals and risk management on the short trade here.
SOL is in a weird place for us now. On the local market (JSE listing) we see that SOL was firmly rejected by the 200 day moving average. There is also a tertiary trend line that could break and trigger a short trade. If you look SSL (the American Depository Receipt, listed on the NYSE) the picture looks almost perfectly opposite. SSL is holding above the 200 day moving average. Yes, the stochastic is above 80, although we know that the stochastic can remain overbought (and bouncing above and below the 80 level) for prolonged periods of time as trends play out. The MACD has only recently broken above the 0 line, which is indicative that the longer-term momentum might only be starting to turn higher now. I all honesty, we think the SSL ADR will lead price locally as SOL in general will benefit from stronger oil prices.
No real comments here, except maybe this serves as a good example of the stochastic oscillator remains overbought (and bouncing above and below 80) as a trend plays out. This trade is going well. Using a trailing stop loss is always wise.
Back into the range for you! Sell signals coming through from the oscillators as well. TRU could possibly retest the bottom of the range it was in for so long. First up though, the 200 day moving average. Range trade rules apply.
Does VOD go back to the bottom of the range here?
We’re waiting for a retest of the 200 day moving average.
Multichoice Group (MCG)
This chart does not really have much data to work with just yet, although we note that MCG was rejected around the R132 level (and under the 20 day moving average). It offers a high risk-reward short to the R111 support level, with a clear stop loss above R132.
*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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