The blue wave lifts all ships

Very often it’s better to not listen to the news, or the hype of all the mad things happening in the world around us. Most of the time, it’s better to just sit down and focus on the things that we can measure. So to a large extend we try to do that this week, although we must admit the the blue wave in the U.S. is probably the primary driver behind the strength we saw last week. It’s very likely going to be the source of a whole lot more strength in the week ahead. We can debate the sustainability of this market for days, however while the blue wave is pushing it higher, we will not fight it. Unfortunately for our gold ideas last week, things look pretty dire. Although for everything equities (and cryptocurrency), the world is looking just fine and dandy and set to trade higher.

Offshore trade ideas
S&P500 (SPY)

The breakout here seems to be on track with momentum remaining bullish. Our target for this trade is $397.30, derived from the large range. Democrats are now fully in charge of the U.S. and the odds of another stimulus cheque coming in the mail for the average American is pretty high. That creates a lot of optimism, and markets rally on optimism. The blue wave is here and the equity indices are ready to surf.

the blue wave
Russell 2000 (IWM)

Well, we’d thought that this index would likely come down to test the lower supports of the range it has been trading in. As it turns out, IWM broke out of the top of the channel. This is generally very bullish and could lead to a very strong push higher. We note that the market made a bit of a hanging man candle formation on the daily chart on Friday. That is a little concerning to us as it is usually a topping sign. In this context it is just above a key resistance level as well, which adds to its credibility. On the flip side though, momentum seems to have shaken off any bearishness it had. Our gut says “long”, but our brain says “wait”. We’ll be watching this rather closely on Monday.

Nasdaq (QQQ)

Another head scratcher, really. There is strong evidence of bearish divergence, and yet momentum indicators are about to generate a buy signal. We’ll probably see QQQ keep trending higher and eventually test the upper end of the channel. The bus is full and cruising at top speed… no use in standing in front of it hoping it will stop in time to not flatten you. Long target $355.00.

the blue wave
Dow Jones Industrial Average (IYY)

We used a Fibonacci retracement and projection to give us a target of $103 on the IYY a few weeks ago. At the time it seemed a little crazy, but it seems that all the boilers are running and this boat is on its way. Sometimes you just need to forget all the other noise in the market and trust your charts.

the blue wave
Dollar Index (DXY)

Over the past few months the DXY has been trending down very reliably. It seems now that the trend of a weakening USD has come to and end. We note a falling wedge formation on the DXY, supported by bullish divergence on both the MACD and stochastic oscillators. Should the falling wedge break, we’re targeting around the $94 level.

the blue wave

What’s a weekly game plan without at least one grossly over complicated chart? Well, here we have the USDZAR. It reached our target of R14.50 and with the DXY looking like it will move towards USD strength, the USDZAR is looking very fragile. We see a lot of things happening here; first we hit some resistance at the upper end of a long-term (weekly) range (marked in purple). Once that resistance is broken then next line of defense is the black downtrend line. Once that breaks the USDZAR enters into a bit of no man’s land before the R16.16 resistance level comes into play. Should that resistance at R16.16 break, we could have significant weakness on the cards if the 200 day moving average fail to hold. From a momentum perspective, USDZAR weakness looks highly probable as well. Hold onto your hats, because things might get a little wild in the coming weeks.

Ethereum (ETH)

Weekly, logarithmic chart on ETH (as is our preferred way to analyse cryptocurrencies). Our eyes on the $1595 level here as we think that ETH could test it in the week ahead. We think that a break above the previous all time high ($1595) is a buy. When the world is going mad, we can either fight it, or profit from it. Just remember that gearing could do a lot of damage if you are on the wrong side, so please be very careful when trading these things.

the blue wave
Bitcoin (BTC)

Massive flag formation breaking here. For now there is no setup to enter into new trades here, although a decent pullback would be worth buying. Out thinking is that we should see BTC tag the $50,000.00 level before putting in any kind of significant pullback. We think that we could see BTC putting in 40% – 50% pullbacks while this parabolic move plays out over the next year. Our plan is to add each time we get a fast and vicious pullback in excess of 30% with a end of year price target of $200,000.00. Nothing like the blue wave in the U.S. to further promote monetary stimulus and drive individuals and institutions to buy more BTC.

the blue wave

Well, well, well… the breakout from the bull flag is not going according to plan at all. The frenzied bullishness being created by the blue wave is not so bullish for Gold though. Gold is now sitting on two support levels; the $1848 horizontal support as well as the 200 day moving average. Those levels need to hold, else Gold is likely in for some downside here. With such strong “risk-on” setups on the equities indices, honestly it’s not looking good for Gold. We note that momentum is triggering sell signals here as well. Perhaps the play here is to short once the support breaks?

the blue wave
Brent Crude Oil

Brent Crude Oil solidly on the way to our $60.00 target. Nothing really to do here but sit tight and trail up those stop losses.

the blue wave
Harmony Gold Mining (HMY)

Our long trade in HMY (Harmony Gold Mining ADR – listed on NYSE) seems to be in some serious trouble here. With the current situation unfolding on the DXY, equities indices and the Gold price, we think that HMY could test the lower end of the range (flag formation) in which it has been trading. Thus, both offshore and locally, we think that it’s best to sidestep the gold miners for a little while.

the blue wave
South African trade ideas
Aspen Pharmacare (APN)

APN seems to be on the way to the upper end of the range. Friday’s candle is a bit worrying thought. it’s not exactly ticking all the boxes to be classed as a shooting star formation, although it certainly is ticking some. We’ll start seeing some volume return to our market in the coming week though, so perhaps momentum will overrule individual candle formations here. Trailing stop on the longs from here, with the target at around R165.00.

the blue wave
Kumba Iron Ore (KIO)

The failed head and shoulders setup has pretty much played out. The full target is R680.00 and it got might close to that on Thursday. We’re not exactly sure if the push ends here though, so we’re switching to a trailing stop loss and allowing this one to run a little.

Dis-Chem Pharmacies (DCP)

Very nice little bull flag breaking here on DCP. The breakout is confirmed by a buy signal being generated on the MACD. Targets of R24.00 and R26.00 on the long trade here. You had to quick to catch this one on Friday, so if you are not in already, don’t chase it above R23.00 because the risk-reward will not be worth it anymore.

the blue wave
AngloGold Ashanti (ANG)

From our best setup last week, to the one we are most probable to bail on. That said, there is a chance that the last three trading days (three red candles) could be forming a bull flag… We’re not willing to fight against the trend though, so a close below R337.00 will stop us out.

Anheuser Busch Inbev (ANH)

This little setup has been brewing for a few weeks and looks to have finally triggered a long trade. Some mixed signals from a momentum perspective with the MACD generating a buy signal, but the stochastic giving the first of four sell signals. For now the body of evidence weights in favour of the long trade. Stop loss below the lower end of the range, to be trailed higher using ATRx2 method once the trade is deep enough in the money.

the blue wave
British American Tobacco (BTI)

We’ve taken some money off the table here as the bounce has finally run out of steam. Back to R520.00 from here?

Bidvest (BVT)

BVT is starting to line up nicely for a decent long in our view. Above R160.00 opens the door for R190.00 as a first target. Momentum starting to look very bullish as well. Clear stop loss with a good risk-reward on offer. We like this setup, but need to be patient enough to allow it to confirm our entry.

Clicks Group (CLS)

Right, so CLS is almost at the R270.00 level again. Historically it’s been a good sell in this region, although perhaps now it’s time to watch for a bullish break from this level? This is also a rather large flat top triangle. Things could get interesting here if that R270.00 level breaks. Wait for a clear hold of that level though. Momentum is in the middle of nowhere and the stock has been in this range for a very, very long time. The best way to see it is that it is reaching a point of opportunity. It can either reverse at resistance, or break above. Both scenarios has great risk-reward profiles. We just need to be patient enough for the market to show us which one to back.

Coronation Fund Managers (CML)

Attempt number two at breaking the R45.00 level for CML. This time it’s different though (haha, famous last words). CML earnings are closely related to market performance. When the market rallies, so do their funds. This means that Assets Under Management increases, earning them more management fees. Also, when the funds do well, that sweet, sweet performance fee comes into play and adds to the bottom line. CML’s time to pop might well have come.

the blue wave

Nice pennant here on EOH. A strong break higher could see the R12.00 and R14.00 level being tested.

Investec (INL)

Solid bull flag setup on INL. Targets are R44.00 then R48.00.

Imperial Logistics (IPL)

IPL is setting up nicely for a break from that range. Only once above R44.00 will the long be confirmed. For now though, we’re seeing a number of momentum based long triggers firing off one after the other. Worth keeping an eye on we think.

Shoprite Holdings (SHP)

The bull flag on SHP hasn’t broken yet, but it’s still on our watchlist.

Sanlam (SLM)

SLM looking fairly similar to IPL. We need to wait for the range to break before making any moves. It does look really good for a long though.

Sasol (SOL)

Choo choo! The SOL train is coming through! All the boilers are running at full steam and this boat is on its way to R234. This stock is actually one of our top picks for 2021. We think it could get as high as R300 this year. Time will tell, but for now it looks fairly solid to test that upper resistance at R234.00.

Time to switch to DMA CFDs?

Uhm, yes! It was never a good idea to trade Over the Counter CFDs anyway… move your trading account to Herenya and start trading DMA CFDs with a team of traders who take trading as seriously as you do.

*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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Every week needs a new plan!

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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