The weather in the northern parts of South Africa is likely to be a little wild in the week ahead. We just hope that the hurricane that has made landfall in Mozambique does not cause large scale damage. Spending the week indoors, sadly, is nothing new thanks to lockdown. Now we just have to hope that the coal stays dry so that we don’t have electricity disruptions. These are strange times to be living in to be sure. At least we have markets to look at and keep us busy while a hurricane and a virus rage outside.
Please keep safe. Both out there in the real world with COVID and hurricanes, and in the market by always making sure that you use stop losses and never gearing your account more than what you can reasonably manage. A good rule of thumb is to not gear your entire account more than twice… and that only generally once the market is 5% or more from the all time high… so even 2x gearing on all your capital should not really be done unless it is a special circumstance.
Offshore trade ideas
S&P500 (SPY)
The slow grind higher is still in tact. That bearish divergence still needs to be invalidated, although it does seem that momentum is once again turning bullish. We note that on some of the other indices, this bearish divergence has already been invalidated. Our thinking at this stage is that it is a matter of time before the SPY momentum indicators all turn bullish again. In essence, there is no real reason to change our positioning or outlook at this stage and our price target remains $400.00 for the SPY ETF.
Russell 2000 (IWM)
The upper end of the channel is now acting as support. Small caps have been outperforming large caps for a few months now and although this move is starting to feel a little long in the tooth, it is probably still a while away from being done. Unless we see a strong reversal and a move back into the channel, there is no reason to be bearish at this stage.
Nasdaq (QQQ)
The bearish divergence on the QQQ has been invalidated, and thus we turn fully bullish once more. We still think that there could be some resistance around the central line of the channel, although given the madness that is the Wall Street Bets subreddit… it would not surprise us if we saw the QQQ test the upper resistance channel line in the weeks to come.
Dow Jones Industrial Average (IYY)
Not too much to comment here. The market is trending towards the Fibonacci targets shown in previous posts. Our first and second targets remain $98.50 and $103.00. A trailing stop loss on a daily close below the 20 day moving average is advised.
Philadelphia Semiconductor Index (SOX)
Time to see if the upper channel line offers strong support. Our thinking here is that SOX should lead QQQ. Also, it is worth noting that once all this Bitcoin madness really starts to grip the public, there is going to be a whole lot of demand for graphics cards and processors. This is a key index to watch this year (2021).
Dow Jones Transportation Index (DTX)
This one is not feeling as strong as the others and could perhaps be a precursor to what lies ahead. Until the channel is broken though, there is no real trading setup here. We need to be a little patient and wait for the DTX to give us a sense of what it wants to do.
Dollar Index (DXY)
The Dollar has been fighting back a little, although when looking as asset managers net USD positioning, it is starting to feel that almost everyone is on the same side of the trade. Thus, we maintain our view that the USD will strengthen in the weeks to come and our target remains $94.00.
USDZAR
Given the narrative on the DXY above, our view is that the USDZAR will weaken somewhat in coming trading sessions (and weeks). R14.50 now acts as a floor (or, strong support) and our eyes are fixed on the downtrend line. This could be a really good setup in the making, although we need to be patient and allow the setup to confirm before making any moves.
Brent Crude Oil
We don’t really have too much to add over our comments from last week. We see support at $52.50 and have a price target of $60.00. It does feel like momentum is starting to wane a little, although using container shipping rates as a leading indicator of economic activity, we think that demand for oil is on the rise. Thus, we expect prices to keep rising as well.
Gold
Well, well, well… gold managed to hold the key support. In this case, the support is the 200 day moving average (green). The gold price has been ‘walking the line’ around the 200 day moving average and managed to close the week above it. This alone is not a trading signal to us, although is helping to build the body of evidence needed to initiate a new long position. We still need to see the stochastic get above 80, the MACD and signal line cross and move above 0, and we’d like to see price clear the shorter-term moving averages. Once all those boxes are ticked, we think that we could see the next leg up (helped by some good old fashioned brrrr).
Harmony Gold (HMY)
The Harmony Gold ADR listed on NYSE is what we are looking at here. We note that it is holding the central line of the channel and that momentum is starting to turn bullish once more. Our expectation was to see if test the bottom of the channel. Now that it has held the middle so well, we think that it could be setting up for a bullish continuation from this large bull flag.
Bitcoin (BTC)
A hurricane of bad news has been storming around BTC during the last week or so. There has been some panic around a double spend rumour (which is actually just people misunderstanding how the actual blockchain works), as well as, some concerns raised about USD Tether not actually having the real USD to back the pegged cryptocurrency (this is a lot more concerning). This might sound crazy, but we do not think that either of these stories will have much long-term impact on the BTC price. For context, we look at a weekly logarithmic chart (as is the best way to look at cryptocurrencies in our view).
10% drops in one day is not far from what the historic volatility of BTC is. In fact, we think that while this breakout keeps playing out, we’ll likely see a few corrections in the 40% to 50% region. Our only advice here is to avoid trading BTC derivatives like the plague (or the COVID) and make sure that you are buying on a legitimate exchange that has nothing to do with USD Tether. Other than that, we still think that 2021 will prove to be the year of Bitcoin.
Ethereum (ETH)
From the longer-term, to the ver short-term. Here we look at a 1 hour chart on ETH with an ABC setup targeting $1540.00. The optimal entry point for this trade has already been missed, so from here it’s trailing stop losses all the way. For a longer-term outlook on ETH, BTC and other cryptocurrencies, see our Which cryptocurrency to buy in 2021 post.
South African trade ideas
Top 40 Index (ALSI)
The range indicated last week is still largely intact. This week though, we’ve reduced the time frame from 1 hour to 30 minutes. We’ve also set the range extremes on the real body candle closes, rather than the de Mark or Williams points of support and resistance. Our bias here is still very much bullish.
Anglo American Platinum (AMS)
AMS has broken out very nicely. Right now there is no setup to initiate new trades. For those who managed to get into this trade, a trailing stop loss is the way to go.
AngloGold Ashanti (ANG)
ANG is literally sitting on the last line of defense. Momentum is a bit wishy-washy, although there are signs that it might turn bullish again in the week ahead. We need to see the MACD point up as well as a break above R362.00 before we’ll initiate new long positions here.
Growthpoint Properties (GRT)
Momentum wise, things are starting to look good for GRT. Now we need to see GRT break above the 200 day moving average and then we think it can really get going. Yes, things in SA are tough, and yes, things globally are tough… but tough times don’t last forever and these property counters are looking mighty cheap.
Old Mutual (OMU)
OMU has cleared the 200 day moving average convincingly. Once it gets above R14.00, the double bottom at R9.24 comes into play. This is a nice longer-term pick in our view.
Shoprite Holdings (SHP)
A good trading setup takes a while to play out. This much we know to be true, and SHP is no exception. The bull flag is still intact and we still like the long trade once the bull flag breaks.
Sanlam (SLM)
SLM is still stuck in the range and holding above all moving averages. We like the long trade here once the R60.00 level is broken.
Harmony Gold (HAR)
A duplication perhaps, although an access point to those who do not have cost effective offshore trading accounts. HAR has not taken out the swing lows and now momentum is turning bullish again. We like the long trade here with a stop loss below R61.00.
Imperial Logistics (IPL)
IPL is still range bound. Our bias is bullish, although until there is a clear break out of this range, there is no trade. Keep this one on the radar though.
Kumba Iron Ore (KIO)
Last week we indicated that KIO has completed the move and is likely set for a pull back. This week, however, we change our mind. KIO could not break the 20 day moving average and ended the week just under the R680.00 level. The trend is your friend after all, and thus we will be buyers on a break above R680.00 with a trailing stop loss.
Joining HCA trading
HCA trading offers a number of different trading accounts to suit different types of traders. Our offshore trading accounts allow traders to buy shares, ETFs, CFDs and even fractional shares in the United States for only $2 a trade. Locally, we offer shares, ETFs and CFDs at good rates with robust and reliable trading platforms. All our trading, including CFDs, is done on a Direct Market Access basis and thus our clients are able to interact directly with the real equity market and not have to worry about excessive counterparty or liquidity risk. Our prime broker locally is a big four bank and offshore we make use of one of the largest non-bank prime brokers in the world.
Local stockbroking rates
| Trading instrument | Brokerage rate | Margin rate | Minimum trade charge |
| JSE listed equities and ETFs | 0.30% | 100% | R150 |
| CFDs on JSE listed equities | 0.20% | 10% – 25% | R50 |
| SAFEX listed index futures (ALSI) | R20 | 6% – 8% | R20 per contract |
Offshore stockbroking rates
| Trading instrument | Brokerage rate | Margin rate | Minimum trade charge |
| U.S. listed equities and ETFs | USD 1 cents per share | 100% | USD 2 |
| Canada listed equities and ETFs | CAD 2 cents per share | 100% | CAD 2 |
| U.K. listed equities and ETFs | GBP 12 + 0.1% | 100% | GBP 12 |
| Germany listed equities and ETFs | 0.20% | 100% | EUR 8 |
| Forex | 0.40% | 100% | USD 4 |
*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.