Well, after all that bearishness, all we got was one day of #marketcrash trending on twitter and a bounce so glorious I’m sure people will be singing songs about it at some point in the future. It seems that ‘buy the dip’ is not dead just yet. In truth, the irrationality of this whole market is starting to scare me a little, although I am not going to fight the ‘buy the dip’ crowd.
Gold is sitting just above the $1680 support level and is looking very oversold. Although momentum is still pointing firmly down over a longer timeframe, in the short-term we might see Gold bounce from the support here. Perhaps we buy the dip for a retracement to $1750?
Brent Crude Oil
Brent Crude Oil has been super strong ever since the longer-term downtrend was broken. This current uptrend is firmly in place and there is plenty of room for a pullback without it breaking the current uptrend. That said, we’ve been living in hope of a retest of the $60 level, which has not happened. Recent news of extended lower production from OPEC+ drove Brent Crude Oil strongly higher in the last half of last week. The first of our upside targets has now been reached and by the look of things, the other two upside targets (old support/resistance levels) are coming into play. New long trades should probably not be taken here. Waiting for Brent Crude Oil to dip back into the ‘buying zone’ between the 10 and 20 day moving averages would be the better way to play this.
There are two ways to look at the USDZAR right now. The first is that there is overhead resistance looming around the R15.50 – R15.60 zone. We could see a potential reversal from those levels back towards the R14.50 level. The second is to consider the long standing downtrend line that was broken on Friday. Provided the USDZAR can get up and clear of R15.60, the R16.16 level becomes a target. Should it break above R16.16, it would seem that the long-term trend of ZAR weakness will return.
US Dollar Index (DXY)
A little bit of whipsaw, but the falling wedge is playing out. Watch for resistance and a possible reversal around $93. Above the 200 day moving average and things will start to get really interesting.
The channel held! Two very bullish looking candles in a row, right on that channel support as well. The ‘buy the dip’ crowd is relentless. The trade would be to take a long back to the upper end of the rising wedge. Seems our $400 level is back on the table.
Russell 2000 (IWM)
Another stock index chart, another massive hammer! There are a lot of proper hammer formations all over the market after Friday’s reversal. In the case of IWM, it’s off the 50 day moving average. We could see a bounce here and a return to the uptrend.
Hammer time! Maybe not as nice as the one on SPY, although from a fairly oversold position, QQQ looks likely to bounce back to the 50 day moving average from here.
Philadelphia Semiconductor Index (SOX)
The hammer here looks fairly good too. This time it’s off the bottom channel support and from an oversold position. Again, the MACD is still showing longer-term bearish momentum, although that is not enough to outweigh the hammer at this stage. The Stochastic is slightly oversold, which could increase the power of a bounce.
Dow Jones Transportation Average (DTX)
DTX popped back into the channel and is a stone’s throw away from all time highs. A break above the 1365 level would indicate more record highs are on the way.
Well, I’ve gotten it wrong on the cryptocurrencies pretty hard over the last two weeks. Overall this chart setup looks constructive. With some ‘risk on’ in general markets, it would be nice to see a new high on BTC.
ETH tested the break out from the previous all time high. Subsequently, the support level held (and did so with a nice hammer candle formation) and price bounced higher. Some ‘risk on’ sentiment would likely do well to drive ETH higher.
South African trade ideas
Top 40 Index (ALSI)
Transaction Capital (TCP)
TCP is a long standing favourite pick, although we’ll not delve into that today. TCP has broken out of a rectangular consolidation and above a key resistance level. Momentum seems to be in its favour as well. Overall, picking up some TCP on the break out offers a good risk-reward entry on a high quality stock.
TRU is still consolidating inside the rectangle around the key resistance level. Initially the thinking was that we might see a reversal around the resistance level and a move toward the lower end of the large range. Although that is still a distinct possibility to stay open too, it now seems more likely that we will see a break higher out of this rectangle. Either way, waiting for confirmation is advised. Both trades offer good a risk-reward and thus a pure mechanical trade based on a directional break from that rectangle is the way to play it.
Tiger Brands (TBS)
This setup has been brewing for a long time. It has given many chances to trade the range, although the trade that I am waiting for is the breakout of this range. For now, still nothing to do but wait for a directional break. Keep this one on the watchlist.
Standard Bank (SBK)
SBK rested its previous resistance (now support) level for a solid two weeks and seems to be holding well. A long entry here with a trailing stop loss (and a hard stop below R130) is the call.
A little bit of patience can go a long way. Oil has been charging and looks sets to keep charging. Subsequently, there is likely no reason to get out of long positions on SOL. R234 might put up a bit of a fight, but once clear of that, we’re looking for R300.
NTC is still looking rather constructive. Another day or so of higher prices and the momentum indicators will have generated all the bullish signals they can. Combined with the small downtrend break, this is a fairly good setup.
NED is in the process of establishing a new longer-term uptrend (as are many stocks on the JSE actually). For now though, there is still nothing to do on NED. This rectangular consolidation is yet to give a trigger, but is most definitely worth keeping a close eye on for a signal.
MTN has, as always, a host of problems. The most seemingly insurmountable of all, and also only at this very moment because MTN are literally always in trouble, is that they need to register 37 million of sim cards in Nigeria in four weeks. Honestly, I don’t see how they are going to do it, but, do not underestimate the impact of a higher oil price and an emerging market basket buy order. A break out of the small rectangle would offer a great risk-reward long trade.
Investec (INL, INP)
First the fake out, then the breakout! This looks like the start of a long slow grind toward R58.
Harmony Gold Mining (HAR)
The short trade is not looking very good anymore on HAR. It does look like a spinning top that tagged the 50 day moving average, which could be seen as bearish. Although HMY closed near the highs in the US, so odds are we’ll stop out of shorts on Monday. A bounce in the gold price, and keeping the USDZAR in mind, could send these gold stocks aggressively higher.
EXX is in a nice strong uptrend with a bullish engulfing candle after a short pullback. Add a potential momentum based buy signal and you get a hard stop under R160 on a long trade with an ATRx2 trailing stop. You could probably take a chance and load a buy order around the 20 day moving average and with some luck, early morning illiquidity will get you in at a decent price.
Dischem Pharmacies (DCP)
It looks like DCP has made a bull flag with support right on the 50 day moving average. We’ve seen the 50 day moving average has been solid support the last five times it has been tested (four if you only count those above the 200 day moving average). There is also the makings of a momentum based buy signal. The trade would be to go long once the bull flag breaks.
Coronation Fund Managers (CML)
CML looks to be in the process of establishing a solid uptrend. Right now it is in a rectangular consolidation. I would be looking to go long once the consolidation is broken. Emerging markets will probably be a big winner from ‘risk on’ sentiment, which bodes well for CML.
BVT has gotten clear of its consolidation as well. Long here with a stop under R165.
BID Corporation (BID)
The short trade on BID has been stopped out. It has broken out of resistance with some flair too! Long and strong from here, although I would not chase it. Rather wait for a retest of the R300 level.
Brait SE (BAT)
The BAT trend change is not going so well. For those that like really crazy high risk-reward ratios and aren’t scared to take a stop loss, taking a long at these levels could be a great trade. If R2.35 breaks though, I guess numbers can get smaller.
Gold Fields (GFI)
The same commentary used for HAR applies to GFI. Technically the Head and Shoulders pattern has still not been invalidated and Gold could put in a decent bounce without GFI breaking the right shoulder. Our stop is above that right shoulder, so there is really nothing for us to do here right now but stick to the game plan.
Aspen Pharmaceuticals (APN)
APN is on track. Good trades take long to play out. Still looking like we’ll see R165 to R170 in the weeks to come.
*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.