Stimulus, Gold and Bitcoin

Happy New Year and welcome to 2021! It’s an interesting time to be alive… U.S. citizens once again received some free money (this time $600). Much of that is probably finding its way to Bitcoin, hence the powerful push over the New Years weekend. Markets open for trading on Monday though, and our thinking is that the major theme for the week ahead is going to be stimulus, gold and Bitcoin.

The printing press is working hard in the U.S., but from news flow over the weekend, it would seem that it’s work is not done. Word is that the $600 per person (or $900bln) stimulus deal was only agreed too after a soft commitment to expand the program to $2000 per person in the next few weeks. We’re not sure if that is going to happen, but we do think that stimulus, gold and Bitcoin are probably going to dominate market commentary during the first week of the new year.

Offshore trade ideas
S&P500 (SPY)

Well, the charts are the charts… SPY is testing the upper end of the blue consolidation. A break higher would target the larger consolidation full target. It sounds confusing, so we’ll simplify. Between September 2020 and November 2020 the SPY ETF (S&P500 index) consolidated between $320 and $360. In mid-November 2020 it broke out, triggering a long trade with a target of $400. Between November 2020 and now, the SPY ETF has been in a smaller (blue) consolidation. This smaller consolidation is now looking like it might break higher. A break higher out of the smaller (blue) consolidation puts the larger consolidation target back on the table. In fact, the target for both the larger and smaller consolidations both target roughly the same level of $400.

Stimulus Gold and Bitcoin
Russell 2000 (IWM)

A bit of a confusing picture here on IWM at the moment. In truth, this chart does look a little bearish still. Although, maybe one more test of the upper channel resistance before we see a meaningful pull back? We also know that the Russell 2000 index usually outperforms the S&P500 index during December (seasonality). December is now over, so it is possible that we see IWM underperform while SPY shows some strength.

Nasdaq (QQQ)

A few thoughts here. First, should Bitcoin go totally nuts again this year (which is our base scenario), how will QQQ respond? Strong Bitcoin prices will probably lead to even more bullishness in tech (and semiconductor manufacturers – Pro Tip). QQQ is still showing some bearish divergence and momentum is still in the middle of nowhere really. The gut instinct here is short, although for now, caution is the name of the game. We have no intention of standing in front of a freight train, praying it will stop.

Dow Jones Industrial Average (IYY)

This Fibonacci retracement (and projection) target of $103 is still on the table for IYY. It ended the week close to the highs and is looking fairly decent for a push higher. We’re thinking that the New Years stimulus cheques most Americans received (and still are) is going to do well to get the masses feeling nice and bullish come Monday morning.

Stimulus Gold and Bitcoin
Philadelphia Semiconductor Index (SOX)

SOX is starting to look really good for another test of the upper channel resistance. Momentum is starting to move towards bullish again. Let’s face it, Bitcoin is likely to be a big (albeit somewhat removed) driver of this index for the year ahead.

Dollar Index (DXY)

Our weekly price target of 89 still applies on the DXY. The question really is now; how much more does the Fed print, and how far below 89 does that push the DXY? For now, we see no tradeable setup here, but we will be watching that 89 level closely. A break below could trigger a short trade. Don’t chase or front run the move though. Patience is the name of the game.

USDZAR

Our price target of the USDZAR was reached three weeks ago. Well, the actual target was that green moving average (which is the 200 week moving average). We aimed at R14.50 as at the time of the break out, that was the level. Now though, much has changed. Most notably, the US Fed has added even move money to the system. So it follows that we see more USD weakness, more risk-on sentiment and likely stronger emerging market currencies. Do we see the USDZAR test the lower end of the large pink consolidation around R13.00? Right now, we think there is a 70% probability that is the case in the next 6 or so months.

Brent Crude Oil

Weekly chart on Oil for context. We still our base expectation of Brent Crude Oil prices testing $60 in the coming months is very highly probable. Nothing to do really but use trailing stops and sit tight.

Gold

We’re using a weekly chart on Gold as well. This bull flag formation is really starting to look good. We need to see it break out higher. When it does finally break though, the gold stocks are probably going to fly! Drivers here are, well you guessed it, a large battery of industrial money printers in the Fed basement and some dude called Powell.

Stimulus Gold and Bitcoin
Bitcoin (BTC)

We’ve made rather a lot of commentary on Bitcoin and other cryptocurrencies over the last week or so, so we will not be adding any commentary here. In essence though, BTC has broken out and is looking rock solid for 2021. Our thoughts at present are that it’ll likely push to $50k before we see any sort of meaningful pullback. Just a disclaimer, not everyone on the team shares this view. There is at least one who is wildly bullish though. For a more detailed look into how we think we should be trading BTC in the year ahead, please read the 2021 roadmap for Bitcoin blog post. If you would like some charts on some of the altcoins (and more charts on Bitcoin), please read the which cryptocurrencies to buy in 2021 blog post.

Stimulus Gold and Bitcoin
South African trade ideas
AngloGold Ashanti (ANG)

Most of the gold stocks are looking really good to us right now. Technically on Thursday last week, ANG closed below the trigger level. Should our base expectation play out (higher gold on the back of Fed stimulus), we’re aiming at R425 as an initial price target on ANG. Let’s see how crazy 2021 gets. These gold stocks could have plenty of upside.

Stimulus Gold and Bitcoin
Harmony Gold (HAR)

Perhaps the HAR chart can add some context to the whole sector. This is a wonderfully big bull flag. It’s made a death cross, yes, although we think that sometimes the fundamentals overrule the long-term averages. Besides, fake signals are nothing new for technical analysts. HAR needs to break this pattern though, before any new trades can be taken.

Stimulus Gold and Bitcoin
Gold Fields (GFI)

We like GFI for a long as well, should that blue consolidation break trigger a long. This setup offers a really good risk-reward. Wait for confirmation before entering.

Stimulus Gold and Bitcoin
Sibanye-Stillwater (SSW)

Not a pure gold play, but a precious metals play. The range in which SSW has been trading since August 2020 has finally been broken. We also see that it was retested and managed to stay above the resistance zone. Simple trend following play here. Two note though; first is obviously the gold price narrative. Second is the post-COVID recovery narrative. Should industrial production (and vehicle production) levels continue to pick up, demand for Platinum and Palladium will follow.

Woolworths (WHL)

WHL is looking fairly solid. It’s probably not worth chasing if you are not already in, but the R43 target price is looking within reach.

Shoprite Holdings (SHP)

Nice bull flag here on SHP busy setting up. Notably it’s above the 200 day moving average as well. We’ve been making some noise about long-term trend changes over the last few months. This is a very good example of that. A break out of this bull flag formation targets around the R200 level. This could be the second chance to catch a decent, multi-month move on SHP. Stop loss below R120. It’s a long way down, so trade small and be patient.

RMB Holdings (RMH)

RMH finally looking like it has some clear skies ahead! No real commentary here, but that R2.00 level is looking might close right now.

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.

*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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