Santa loves US Fed stimulus

Well, technically the Santa rally is only really the period between Christmas and New Years, although traders have been ‘front running’ this seasonality a little over the last few years. Furthermore, from what we’ve seen on the newswires over the weekend, it seems that another round US Fed stimulus is almost certainly going to be finalised before US markets open on Monday. Nothing like a freshly minted $900 billion to get markets into the festive mood.

Offshore trade ideas
S&P500 (SPY)

There is no new trade setup here, although the breakout from both the big and small consolidations is feeling good. Add some US Fed stimulus as a tailwind, and we have a recipe for Santa’s favourite… green candle cake.

Nasdaq (QQQ)

A nice breakout and retest of this pennant. Also a break to new record highs. The central channel line (very light grey) might put up some resistance. Looking at the way the market is trading though, at least in the very short-term, the extreme optimism and stimulus will likely keep pushing this market during the festive season.

Russell 2000 (IWM)

No much further to go before we reach the top of the channel.

US Fed stimulus
Dow Jones Industrial Average (IYY)

The Fibonacci extension targets rather a lot higher. We don’t expect that the market will move in a straight line up, although should monetary policy remain as supportive as it currently is, we think that this index (ETF in this case) could rally another 10% or so from here.

US Fed stimulus

Gold is still trading in the large bull flag formation. We think it likely to break higher on the back of more US Fed stimulus. Wait for the breakout before getting involved though.

US Fed stimulus
Brent Crude Oil

We can’t add too much commentary over what we’ve been sharing about Oil over the last few months. So far this setup (complimented by a solid fundamental backdrop) is working out according to our expectation.

Dollar Index (DXY)

Looking at a weekly chart here on the DXY. Our full target has not yet been reached, although additional Fed stimulus will very likely drive it all the way to 89 over the next few weeks.

US Fed stimulus

USDZAR has reached our target. From here it could overextend a little and possibly trade as low as R14.00. Once the Santa rally is done and the market comes off the ‘high’ of more US Fed stimulus action, we could see a proper reversal. We’re thinking that now is a good time to buy some USD to send offshore.

Want to trade offshore?

US listed Equities, ETFs, Options, Futures and CFDs at $2 a trade. If you are actively trading offshore, it’s time to open or move your account to HCA trading.

South African trade ideas
Anheuser Busch Inbev (ANH)

No trade just yet, although this setup is looking very solid. Our bias is toward the long side, but we need to wait for a breakout of this consolidation.

ABSA Group (ABG)

A little messy, but ABG seems to be heading to R135. A healthy dose of patience and a trailing stop loss is recommended.

Aspen Pharmacare (APN)

APN is looking good for a move to the top of the channel. The safest way to play this would be to wait for the break of R135 to trigger a long entry, with a stop loss below R121. If you are already in this trade, patience and risk management are key. Stop loss below R121 and an ATRx2 trailing stop once it gets moving.

FirstRand (FSR)

Don’t chase it if you are not already in it. There are other setups on other banks that are looking really good. FSR seems to be the leader of the pack at the moment (if you ignore Capitec). Short-term target here is R57.57, although equity investors who bought the break of the 200 day moving average might want to just hold this for a few years (or at least until there is a large enough body of evidence to sell it).

US Fed stimulus
Growthpoint Properties (GRT)

Huston, we have lift off! GRT finally breaks above the 200 day moving average. Once above R14, we’re looking for targets at R15 and R16 in the short-term.

Nedbank (NED)

Very nice setup here on NED. Solid bull flag break. The stars seem to be aligned for the local banks. Targets here are R160 and then R170, with a stop loss below the swing lows.

US Fed stimulus
Woolworths (WHL)

Another decent looking setup, this time on a local retailer. Once again, the stronger ZAR and Santa spirit (in the form of US Fed stimulus this year) will likely drive WHL higher. Our targets are R43.33 and R47.30, with a stop loss below R35.

Kumba Iron Ore (KIO)

The upper resistance of the 5 day consolidation that KIO has been in was at R607.50. KIO managed to close above that on Friday. Those who did not buy the break of R550 can go long here with a stop loss below R590. Although be careful, this stock is not very liquid and can be very volatile. Rather use a daily closing price to confirm before stopping out as the spread can be pretty big when the market opens. For those already long, moving your stop higher to R590 is advised. Full target for this trade is R680.

Impala Platinum (IMP)

IMP was a great setup. Broke the consolidation, retested it and boom! Trailing stop loss from here.

Truworths (TRU)

This TRU setup is looking very good as well. Easy to identify stop loss and a good risk-reward ratio. An A+ setup in our playbook.

The Foschini Group (TFG)

TFG is also looking very good in our books at the moment. Blue Santa shoe loves local retailers (and banks).

Sibanye-Stillwater (SSW)

Blue Santa shoe also loves gold and platinum producers. Especially those that can do both, and also those that can make the shiny stuff by recycling the not-so-shiny stuff. SSW breakout looks like a very solid play.

Sanlam (SLM)

This setup on SLM has not broken out just yet, although is definitely worth preparing for.

RMB Holdings (RMH)

The level breaks and the skies look clear! RMH initial targets around R1.70.

Netcare (NTC)

Local hospitals are starting to turn away non-critical patients again as they are reaching capacity of COVID patients. The second wave and now potentially more potent strain of COVID-19 could once again wreck havoc, which in turn will negatively affect local healthcare stocks. The chart is looking fairly good though and in this case, we’re following what the chart tells us. The small consolidation has broken higher and momentum has shifted in favour of the bulls. We have targets at R13 (medium-term moving average resistance) and R14 (long-term moving average resistance).

Mediclinic (MEI)

The MEI setup we pointed out last week is offering a very high risk-reward on the long trade.

Life Healthcare (LHC)

LHC also looking like a very decent long from here.

Liberty Holdings (LBH)

No triggers just yet, but this pennant on LBH is looking like a good long trade in the making.

Harmony Gold Mining Company (HAR)

HAR looks to have bounce off a double bottom. We’d like to see if break this bear flag, but it will have to get through converged moving average resistance around R76 first. Overall though, we like the long with a stop loss below R60 (we are long HMY, listed on NYSE).

US Fed stimulus
Goldfields (GFI)

GFI is looking for a long once this consolidation breaks.

US Fed stimulus
AngloGold Ashanti (ANG)

Similar to both GFI and HAR, ANG has made a double bottom / rectable consolidation. Here though we can clearly see the downtrend line coincides with the breakout of the rectangle. We really like this for an A+ long trade setup.

US Fed stimulus

*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.

A new year, a new trading account!

We are setting the standard for stockbroking service and fees. You can open your account and transfer all your current open positions and cash before the new year starts. It’s holiday time and you can’t go to the beach, so you might as well use the time to move your account over and join our team.

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Markets change all the time. New fundamental drivers emerge, technical setups mature or fail and our trading plan must adjust in order to keep up with the ever changing environment. Every week we highlight some of the trade ideas that are generated within our client community so that you can stay on top of what we're looking out for and planning to trade at the beginning of each week. 

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