Fresh new stimulus cheques in mail and record high options trading volumes. The market is a very confusing place right now to be honest. Well, maybe not actually. It’s fairly obvious that stimulus money is finding its way to extremely speculative trading instruments (which includes Bitcoin) and that the greed ruling markets at the moment is firmly cemented in place. Even with all this additional money in the system diluting its value, the mighty Dollar is fighting back and strengthening.
That could be the result of the blue wave sweeping across the U.S. and the belief that democrats will do whatever it takes to ‘keep the party going’. It could also just be on the back of the world starting to recover from COVID and sort of getting back to business as usual. Time will tell how much longer the market can go up. Probably for at least another year. In the very short-term though, we think there could be some turbulence.
Offshore trading ideas
Our base expectation here is that the breakout should still play out over time. Nonetheless, we must point out the growing divergence between price and the Stochastic oscillator, as well as, sell signals being generated by the MACD. We would not be too surprised to see a pull back and a retest of the large consolidation though. Hence we are staying open to two scenarios; the blue consolidation upper resistance (now support) holds and we continue to see our expected move toward $400.00, or, the support fails and the market scrambles for support around the 50 day moving average. Unless that bearish divergence is nullified soon, the second scenario appears to be the highest probability outcome for now. Long story short, be careful with the longs.
We’ve been looking at the bearish divergence on the QQQ for a little while now. As is the case with the SPY, this divergence either needs to be nullified soon, or we’d expect for this large channel to break. In this particular case, should the lower channel support (coinciding with the 50 day moving average) break, we’d expect the QQQ to trade toward $270.00 and the 200 day moving average.
Dow Jones Industrial Average (IYY)
Our target on IYY remains $103.00. With the same overbought narrative though, in the very short-term it is looking rather fragile. From a pure price trend perspective though, it would seem that waiting for a dip to buy is the way to go.
Russell 2000 (IWM)
IWM broke out of the upper end of the channel and has managed to hold above it for the week. Once again there are some momentum concerns here. Should IWM trade back into the channel, we think it is rather likely to see it testing at least the 50 day moving average. Let’s watch though, because some brrrr to pump the call options might just keep traders greedy enough to keep piling into small caps.
Philadelphia Semiconductor Index (SOX)
Could SOX be the canary in the coal mine? That is a shooting star candle formation, on a key resistance level, with bearish divergence (not shown) and the first of four sell signals being generated by the stochastic oscillator. If we had only one chart to give us an idea of what the week ahead holds and we looked at SOX, we’d be putting on some shorts. Be careful out there this week. The mighty Dollar might be mighty mighty, but semiconductors just might be signalling a pull back for the equity markets here.
Brent crude oil
Brent crude oil has had a good run. Honestly, we don’t think that it is over just yet. That said… “nothing moves in straight lines”. Perhaps a test back to the $52.50 level before forming a base from which to trade higher?
Well, would you look at that? The support that needed to hold… didn’t. If the mighty Dollar fights back properly, gold and other commodities are likely to come under pressure. We’re open to the idea that this might be a fake break below a key support, so we don’t want to be too hasty. We’ll give it a day or so to get a feel for what it wants to do before making any calls, but for now we’re thinking that it might be time to close the gold longs.
Dollar Index (DXY)
The mighty Dollar fights back! This falling wedge is breaking our very nicely. We’d like to see it clear the 50 day moving average now and head toward our target at $94.00.
We’re looking at a weekly chart on the USDZAR. There are a few signs of a trend change, although we need a few more data points (weeks) before there are any valid setups here. If the DXY keeps firming though, the mighty Dollar will likely globber the ZAR and we could see a trend change. For now though, we see no setup on the USDZAR.
South African Trade ideas
Top 40 Index (ALSI)
Here we have both the daily and 1 hour chart for the J200 Top 40 Index (more commonly known as the ALSI). We note a tight consolidation on the daily. Looking at the 1 hour chart, we see a very clear rectangular consolidation that we think is offering a great trading opportunity. Once that consolidation breaks, we think we could see a fast and strong move. Our bias currently is toward the downside.
Blue Label Telecoms (BLU)
BLU is looking fairly good. It’s looking like it’s made (and broken out of) a rounding bottom. In the longer-term, this would be a trend continuation setup.
BAW broke it’s consolidation, although has not really gotten going. Our bias is still long here, especially over the long-term.
BHP Billiton (BHP)
BHP might be a good play here if that bull flag breaks, although perhaps it needs to come off to test some moving averages first? No trade setup for us here. This is just one that we are watching for now.
BVT is still looking good to us. We need to wait for it to break out before we can take it though.
Clicks Group (CLS)
Well ok, it’s not just the mighty Dollar, but also the mighty CLS! The resistance broken here is significant, make no mistake of that. The question is though, is it a fake break or does it have some follow through? Although we can’t know the answer until more time has passed, we like the risk-reward on the long trade here.
Dis-chem Pharmacies (DCP)
Break, retest, go! At least that’s what it looks like. We think that our long trades here should do well.
Impala Platinum (IMP)
The mighty Dollar could come and spoil this party, but overall this flat top triangle is looking pretty solid. Depending on how you draw the upper resistance of the triangle, it may or may not have broken out. We would like to see at least one more green day and higher close before committing to a trade here.
INL seems to be on track for a medium-term trend change (as so many of the financials stocks are). The bull flag has broken and all the moving averages are pointing up. Watch out for liquidity in this bad boy though, since there is still the INP and INL listings, liquidity on these can be sparse and big moves can happen on small volume. Best to use a daily close when setting your stop loss.
Kumba Iron Ore (KIO)
All good things come to an end. Our target was R680.00 and it actually traded through that level (although only briefly). It seems now that the recent up trend has broken. We also note that momentum indicators are firing off sell signals. There could probably be a short trade in here back down to the 50 day moving average.
HCA offshore trading
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*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.