Markets have been uneasy for a rather long time now. Well, uneasy is perhaps a mild way to put it. Markets have been uneasy for the last few months, maybe, but just over a year ago markets were in a full-blown panic. Thankfully those crazy times have passed. Over the last two weeks, we’ve even seen the VIX below 20, which is something that has not happened in a mighty long time. Lower volatility signals higher risk appetite and we think a VIX below 20 signals risk on in equity markets.
Offshore trade ideas
S&P 500 Volatility Index (VIX)
We’ve used a weekly VIX chart here to illustrate the significance in the recent reduction in volatility. For over a year the VIX has not ended a week below the 20 mark. Now for two weeks in a row, not only did we see a close of the VIX below 20, it has closed at the lowest level in over 12 months. This is rather significant as it implies that the fear and uncertainty borne of the Coronavirus Pandemic is starting to abate and investors risk appetite is likely returning.
S&P 500 (SPY)
Up, up and away! The MACD trendline from last week has been broken as well. Given the ‘VIX below 20’ context above, it is probably best not to try and pick tops in this market for the next little while.
The bearish ABC setup has been invalidated as the market closed above the highs of ‘B’. The more brave can take new long positions from here with a trailing stop loss. Perhaps with the VIX below 20, we might see some new highs on the QQQ’s.
Dow Jones Industrial Average (IYY)
Despite a few instances of pessimism and false signals, the IYY is playing out according to targets set months ago. This is a good example of the value of patience.
U.S. Dollar Index (DXY)
Looking at a weekly chart on the DXY, there are some signs of resistance. The 50 week moving average, coinciding with the upper end of the green channel, could potentially be a turning point for the DXY. For now, we need to wait another while for some clarity, and also to see how much brrrrrr we get in any additional rounds of ‘covid relief’ from the Biden administration. If the printers are turned on again, we could see more USD weakness and likely the VIX staying below 20 (a.k.a. equity markets rally).
Brent Crude Oil
Looking at a weekly chart on Oil, we note a potential bullish setup on the break of a short-term downtrend. Note that this is a weekly chart, and thus any trade here will only be triggered at the end of this coming week. More active traders could probably look to lower time frames to find a long entry here. Just be sure to keep a well defined stop loss as a retest of the primary trend line (black) is still possible.
A nice double bottom off a key support level, as well as a (somewhat messy) break out of the downward sloping channel. Overall things are looking pretty good for Gold. Let’s see if a stable VIX below 20 and a very large printer can help the Gold price catch a bid.
In our view, the USDZAR is now range bound between R14.50 and R15.55. From what we’ve seen, the current ZAR strength is a little misplaced and we would not expect that the ZAR will strengthen beyond R14.50. That said, we could be wrong and a break below R14.50 would make for a decent trend following trade. At present though, our thinking is that we can take long positions from that R14.50 level, with a target at the top of the range.
The weekly candle on ETH is not yet finished (about 12 hours to go from the time of writing), so we very technically don’t actually know if this has triggered or not. The trade here though, is to buy on the weekly close above the previous all time high. It should be safe enough to get involved now, with a ATRx2 (weekly) trailing stop. Destination: moon.
BTC does not have such a clear setup on it as ETH has, but a break higher can likely be bought with the same trailing stop loss methodology as ETH.
South African trade ideas
JSE Top 40 Index (ALSI)
The bullish divergence on the ALSI looks like it will lead to new highs. The ALSI was stuck under the 20 day exponential moving average for three days, but closed above it on Thursday. The ALSI feels constructive here for a move to new highs.
Anglo American PLC (AGL)
AGL triggered a long for us last week, and since then has been consolidating. We still like the long trade and know we must be patient and allow the trade the time to work.
AngloGold Ashanti (ANG)
ANG bounced from support. It is now trying to get above both the 50 and 89 day moving averages. A solid break above R340 could see ANG testing the 200 day moving average around R400.
Aspen Pharmacare (APN)
APN almost stopped us out below R136. WIth furious might though, it ripped higher in a few short days. Our target is still the top of the channel, now around R170.
BHP Billiton (BHP)
The BHP trade has not progressed as well as we had envisioned. We got a solid entry (similar to AGL), although unless BHP catches a bid real soon, we will stop out below R408.
Gold Fields (GFI)
A break above the right shoulder (R159.26) would still be considered the ideal bullish signal, but GFI is looking good for more than just that. GFI has now broken above the 89 and 50 day moving averages, for a third time. Moreover, Gold seems to have made a double bottom and is attempting a trend change. Further, the ZAR (we think) should likely weaken towards R15.50. Thus, we have a decent setup for GFI and most other gold stocks.
Harmony Gold (HAR)
HAR bounced so well off that support level from last week. We can’t add too much more commentary here, other than this is another good looking gold stock for the week ahead. Perhaps R80 is possible?
The idea of taking a short trade here is a rather uncomfortable one to be honest. That range is well defined though and the risk-reward on offer might make it worth it.
The trend is your friend! Should Oil prices break higher, and the ZAR weaken, there is not much that is going to stop SOL.
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.