The U.S. market is closed on Monday for Presidents’ Day, which means that our market will likely be rather quiet at the start of the week. Overall though, the bullish trend is strong and has been for some time. I rang some alarm bells last week, although it seems that I was wrong. This doesn’t mean that we should all rush out and put on a thousand new long positions. Patience, caution, always.
An interesting look at seasonality around Presidents’ Day (from Bespoke) shows that generally during this week, the market starts off weak and ends relatively strong… but generally netts off around flat to slightly lower. Perhaps this early-week weakness can give us some good opportunities to get into decent long positions to keep backing the trend?
Offshore trade ideas
Philadelphia Semiconductor Index (SOX)
The trend is strong with this one! I’ve noted a number of times that I consider SOX as somewhat of a leader to other indices. This view has not changed, mostly because of the very heavy weighting that tech companies have in the larger market indices such at the S&P 500. SOX has now broken out of the upper end of the channel for the second time. The trend here is very strong. Further, massive amounts of stimulus and what I still believe is going to be an awe inspiring rally in Bitcoin, will likely keep driving semiconductors (and thus the broader market) higher.
Dow Jones Industrial Average (IYY)
It took a few months, but it seems that the full $103.00 target is within reach. A new long trade here would stop below $98.50. Just be wary of the potential seasonal early-week weakness. It could give a good opportunity to buy closer to $98.50 and increase the risk-reward profile of any new trades. A little bit of patience could go a long way here, especially when the trend is strong and the money printer is gently brrr-ing in the background.
The midpoint of channel has been offering some resistance to QQQ for some time now. As you can see by the floating “?” on the chart, the expectation of what could happen if this channel breaks is rather dire. That said, the channel has not broken and the trend is strong. There is no high probability setup to trade here in my book. I’ll be keeping an eye on the channel midpoint though. Perhaps a break above or reverse from it could offer a good trade.
Russell 2000 (IWM)
IWM also broke out of its channel rather convincingly. So much so that I have removed the upper channel resistance trend line from the chart completely. A little while ago I’d thought that the tertiary trend line (red) was broken and that a short trade was on the cards. But, the trend is strong… and up she went. Again, there is no high probability setup to trade (in my opinion) on this index at the moment.
S&P 500 (SPY)
For the last two weeks, in the weekly game plan posts, I’ve signalled a few warnings about the market being a little too stretched. Although my view has not really changed all that much, the market trend is so strong that we simply cannot fight against it. Perhaps we’ll see SPY correct to the bottom of the channel, but even then the trend will not have been broken. On the flip side, that $400.00 target is getting might close now. I guess the bull market rages on I need to remind myself that “our job is not to predict, but to follow”. Even so, I am not confident enough to put on new long positions here. With some time and patience, a high probability setup will emerge.
Volatility Index (VIX)
So the VIX had the lowest close in about a year. Initially I’d thought that getting long some VIX calls with a strike at 35 for about a month out would be a great risk-reward trade. I’m now starting to think that we might see the VIX break below 20. A break below 20 would no doubt keep the equity market party going.
Dollar Index (DXY)
DXY still looks set up for a push back toward the $94.00 region, although the there are some warning lights that are starting to flash. Momentum is starting to look a little bearish (potential USD weakness), while the 50 day moving average has managed to hold over the last four trading sessions. There is also some bearish divergence and a host of generated sell signals on both the MACD and the Stochastic oscillators. A convincing break below $90.00 would negate and USD bullishness and likely see the DXY trading lower. This could bring some relief to commodities and continue to strengthen the ZAR.
I’ve not made any changes to my USDZAR chart for some time now. It seems that the strong resistance (black) is holding. The R14.50 level is being tested again (which coincides with the 200 day moving average). A break below the key support (R14.50) could see the USDZAR trading toward the lower end of the purple range, around R13.25.
Schalk Louw posted a USDZAR chart on twitter that is also very much worth having a look at. Although slightly different from my chart above, he targets R13.85. This is a very highly probable outcome in my view.
There are rather a lot of different inputs that drive the Gold price, so it is hard to get a complete picture of exactly which drivers the Gold price is likely to react too. Should the VIX break below 20, Gold might react negatively. Although, more money printing could be good for Gold, and likely also get the VIX below 20. So instead of trying to overanalyze the Gold price, let’s just look at the chart and keep things “technical”. In that sense, we see that Gold has broken they key support. The support is now resistance and has been tested. From a momentum perspective, we don’t really have any information to work with. It is worth noting that the 200 day and 50 day moving averages are literally on the verge of making the dreaded “death cross”. From a trading perspective, there is no setup here right now. Perhaps a long above $1880.00, or a short below $1775.00 are the two possible plays here, but we will need to wait for either of those to trigger.
Brent Crude Oil
Brent Crude Oil smashed through the $60.00 target price. I’ve marked out some de Mark or Williams points of resistance that now act as potential price targets for Oil on the upside. It’s no secret that the Herenya team has been very bullish on Oil, and in truth, that is not about to change now.
South African trade ideas
Top 40 Index (ALSI)
The trend is strong with this one too! There is no real high probability setup here right now though. Perhaps if you look at shorter-term timeframes (like the 1 hour chart), you could trade the range break out. On the daily time frame though, there is nothing really to do but be patient and wait for a decent setup. My bias here is long… the trend is your friend after all.
RMB Holdings (RMH)
A little bit of patience goes a long way. RMH has finally broken well clear of resistance and it seems that there are clear skies ahead.
REM is looking really good for a longer-term equity investment. It looks like it’s put in a nice rounding bottom and the “golden cross” is coming up. This has been a relatively popular chart in the SA Fintwit scene as well. I think we’ll see the gap at around R140.00 close in the months to come. Remember though, patience. It’ll probably be best to buy this in vanilla equity and book it to the long-term account.
Nedbank Group (NED)
Going nowhere slowly… NED is still in the range it has been in since breaking above the 200 day moving average. My bias here is still bullish. Until the range is broken though, there is no setup for me to trade here.
Mondi PLC (MNP)
MNP… the trend is strong! The better setups here are longs off the 200 day moving average, though there is a long setup off the 50 day moving average. A simple consolidation break, with both MACD and Stochastic oscillators lining up for a decent set of long triggers. Stop loss below the swing lows around R355.00, target at R410.00. Entry can maybe be taken off a 30 min or 1 hour close above the range high of R372.50.
Reinet Investments (RNI)
Well, what a nice little trade that was! I guess the question is now; does it reverse back to the support at R262.00, or does it break the 200 day moving average and have a go at the R330.00 level? Time will tell, but I am keen to buy the bullish break here.
Harmony Gold Mining Company (HAR)
The last line of defense has been breached! The trend is strong with this one too, just the down trend is strong this time. Maybe we’ll see some support at R50.00, then R40.00. A stronger ZAR and weaker Gold price is going to be bad news for gold stocks in general. Add this broken support to the mix, and we have a strong case for a short trade here.
Investec (INL + INP)
Two perspectives, two charts, same company. Either way you cut it, a break above the key resistance here will be a strong buy signal for me.
Medium-term trend changes are quite a thing. EOH seems to be gearing up for the next leg up. The Stochastic oscillator has already given three of four buy signals and now the MACD has given both it’s buy signals. Furthermore, the 50 day moving average has held as support. I’m happy to add to EOH here and ratchet the stop loss higher.
African Rainbow Minerals (ARI)
ARI is looking pretty good in my book. The trend is strong! There are also a series of buy signals firing off on the momentum indicators. ARI is offering a good risk-reward setup for a long trade.
Aspen Pharmacare (APN)
APN is still in the large channel that is has been in for almost three years now. Right now though, it has broken out of a relatively small bull flag. It looks like the bullish break will drive the APN share price to the upper channel line. Currently there is a long positions already open on APN from an earlier long signal (a few weeks ago), but adding to that position and moving the stop loss higher in order to take advantage of this break out is the play for me.
ABSA Group (ABG)
ABG goes to show… when the trend is strong and the patience is plenty, money will be made.
AngloGold Ashanti (ANG)
ANG doesn’t look as bad as HAR, but let’s be honest… it doesn’t look good. A break below R337.00 would likely be a decent short.
BID Corporation (BID)
The trend is… sideways. There is also some bearish divergence and price is currently in a historic zone of resistance. A short trade here with a stop loss at R300.00 with a target at R240.00 offers a decent risk-reward.
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|
*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.