The fast paced world out there always tries to get us to take action immediately. There is a sense of urgency that is ever pressing. You have to buy this useless trinked right now! You have to act now to make money on the stock market! Cryptocurrencies are exploding and you must act immediately lest you want to ‘enjoy staying poor’. This is all garbage. The reality is that there is a lot of patience needed if you want to make any sustainable, long-term progress. The same is true with trading. The patience needed to wait for the right trades, at the right levels is something that almost never talked about. So although there are a few decent setups this week, there are a few markets on which we have to respect the patience needed and wait for a more clear setup.
Offshore trade ideas
It looks like there is a bit of a rising wedge forming on SPY. As things stand now, there is no trade setup here just yet. Some patience needed, but it is worth watching in order to see how this wedge plays out. Ultimately, the SPY is still in its large channel and until that channel is broken, the up trend remains intact. Although there is no trading signal here, some caution is advised and from our perspective, the risk is skewed toward that downside.
As is the case with the SPY above, the trend on QQQ is still firmly up. That said, momentum oscillators are indicating that bullishness is starting to wane. Again, patience needed. There is no real reason to get into a trade on this index and some caution of taking new longs in tech stocks is advised.
Russell 2000 (IWM)
IWM does look a little more bullish than the other major U.S. indices, although here too momentum is somewhat directionless. Our eyes are on the red trendline for two reasons; 1. it appears to have bounced off the trendline and might provide a decent entry for a long trade to a new high and, 2. should that red trendline break, it opens up for a very high risk-reward short trade. Our bias is toward the downside and thus will likely not participate in long trades on this index from here.
Well there you have it… a death cross on Gold. Now the question is; did Gold make a double bottom around $1765? From a momentum perspective, it doesn’t seem that way. A break and daily close below the $1765 level would indicate further downside. Should the support fail, $1680 becomes a possible price target. Conversely, should the support hold and Gold manage to break above $1800, the double bottom long trade comes into play.
Brent Crude Oil
Looking at a weekly chart, it appears that Oil is in the process of making a shooting star candle formation. Oil has run very hard and can put in a decent pullback, without nullifying the current uptrend. This candle formation on the weekly Oil chart has been very reliable as a short-term reversal signal in the past as well. Perhaps we’ll see Oil dip below the 200 day moving average before resuming the uptrend?
Dollar Index (DXY)
The falling wedge (and Inverse Head and Shoulders) that we’ve been tracking is starting to look more and more like it is going to fail. Momentum is starting to turn bearish again and the DXY can’t seem to get clear of the 50 day moving average. Both the MACD and Stochastic oscillators have generated sell signals, thus, should the green trendline break, it would seem that there is more USD weakness on the cards.
That R14.50 level is still holding strong. The trend is still down though and should the DXY (above) break lower, it’s rather likely that we see the USDZAR below R14.50 in the coming weeks.
ETH is not rallying as hard as BTC, although the previous all time high was taken out two weeks ago and it looks set to keep trading higher. Should there be a correction or pullback to $1420, that could be a great opportunity to buy ETH. Generally we see cryptos rallying for four to seven weeks, with consolidations (or corrections) lasting between three to five weeks during these parabolic years. Thus, there is no sense in chasing it, even if it does trade to $2400 in the next two weeks. Rather wait for a correction and a high probability setup, or look on lower time frames for opportunities to get in. ETH is lagging BTC for now, but eventually will catch up.
BTC is leading the charge for crypto’s. Talk of BTC being a viable alternative to Gold is starting to circulate, large corporates are starting to buy BTC to hold it on their balance sheets, regulators are starting to think more carefully about how to class crypto’s and what their place in the financial system is… the mass hysteria is beginning. $68k by the end of the week? Just remember, don’t take massive risk. Treat it like a normal stock and make sure that you have a risk management plan.
South African trade ideas
Anheuser-Busch Inbev (ANH)
High risk little long trade on the table here. The risk reward is almost 1:4. The idea is that the trade either works almost immediately, or not at all. We have some buy signals lining up on both the MACD and Stochastic oscillators, as well as a short-term trendline break. An ATRx2 trailing stop loss would likely work best here.
Aspen Pharmacare (APN)
The APN bull flag was broken and retested. Nothing really to do on this trade other than stick to the stop losses and wait for the trade to work out. Once APN gets above R150, an ATRx2 trailing stop loss would likely be the best way to minimise risk on this trade.
BID Corporation (BID)
This is the same short trade idea as last week. The stop loss remains at R300 with the price target at R240.
BVT has formed a large rectangular consolidation above the 200 day moving average. In the very short-term, it seems as though BVT is setting up for a move back to the bottom of the consolidation. This presents two high risk-reward opportunities. The first is a short trade back to around R150 with a stop loss above R180. The second would be a long trade on a break above the upper resistance of the green rectangle, although by the look of the long wicks of the candles in the zone, we think it unlikely that we see a break higher in the next few weeks. Thus, our bias is short.
This Head and Shoulders formation is ominous. There are some support levels marked out in blue, which together make a zone of support. Should that zone of support fail and price get and hold below R117.50, price targets as low as R60 come into play. A stronger ZAR and weaker Gold price would be a key driver here. Also worthy of note is that both momentum oscillators have generated sell signals.
Harmony Gold Mining Company (HAR)
Not as ultra-bearish as GFI, although HAR has broken a key support of its own. Downside targets are marked out on the chart in blue. A short-term, counter-trend bounce to R61.50 (ish) could make for a high risk-reward short entry (if it gets back up there).
Standard Bank (SBK)
SBK is rather interesting. Although not on a volume spike, it seems to have made a hammer candle formation on a key support level. This is rather bullish. It would be slightly better if we saw a spike in trading volume, so considering that was not the case, it scores a 4/5 on the bullish-candle-o-meter. There are mixed signals though. The candle formation might be bullish, but the momentum indicators are all in a bearish configuration. Well, not entirely… the Stochastic has generated three of four sell signals, while the MACD has generated one of two. This puts us dead even… with four buy signals and four sell signals and another three undecided. Technically that means no trade. Very high risk traders who are disciplined enough to stick to very tight, or intraday stop losses can likely take a long position here, should we have a stronger ZAR by the time markets open locally on Monday. Swing traders though, have no trade setup here.
The Foschini Group (TFG)
TFG has broken a medium-term trendline and has generate a few sell signals on the momentum based oscillators. A short trade with a stop at the two-day high offers a great risk-reward.
TKG is showing early signs of losing bullish momentum, although the fat lady has not sung yet. There is a potential bull flag setup, but it has not triggered just yet. Worth keeping an eye on in the coming week.
After a fake break above R50.20, it seems that TRU is heading toward the bottom of the range once more. Sell signals triggering on the oscillators and poor trading updates from the retailers to boot! A short trade here offers a great 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.