The age old adage of “Sell in May and go away”… Well, it’s May. What now?
Ironically, the bullish breakouts that took place last week, for the most part, seem to be failing. Perhaps “Sell in May and go away” is rooted in more than just seasonality and superstition? Either way, charts are looking a lot less bullish than they did over the last three or so weeks.
Offshore trade ideas
S&P 500 Volatility Index (VIX)
The VIX has been knocking on 20’s door for a little while now. It’s worth keeping an eye on 20, as a break above it (along with a daily close above it) would probably be a good sell (in May) signal.
S&P 500 (SPY)
So the range break didn’t take very long to not look very good. One good thing that we can take from this is that the high on the hanging man candle is above the $420.69 target price we had on the SPY some time ago. Memes aside, that is a fairly nasty looking bearish reversal candle, right above a key resistance level, after a trend continuation breakout. Combine that with both the MACD and Stochastic starting to turn bearish… well, it doesn’t look good for the bulls. SPY: Sell in May and go away. Come back… when there’s a bullish setup again?
Russell 2000 (IWM)
IWM looked a little better than the rest, although it seems to have failed to break higher too. Momentum petered out, the breakout level didn’t hold and our grand bullish plans have come to an stuttering halt. Perhaps it’s time to become a little more defensive?
We were a little cautious on QQQ last week as we had some concerns around the Stochastic giving early signs of coming weakness. As it turns out, the small flag formation didn’t really get going all that well and on Friday QQQ closed below the previous high level of $338.19. This is a little worrisome to us. Sell in May. Do we see QQQ back at $310?
Dow Jones Industrial Average (IYY)
Philadelphia Semiconductor Index (SOX)
The SOX chart is getting messy. The 89 day moving average is going to be a key support level here. SOX has been using the 89 as support for a long while now, so a break of the trendline support will very likely lead to a secondary bearish trend. In other words, a pullback lasting a few weeks. Note also that we consider SOX a leader to QQQ, thus the break of the 89 moving average on SOX could likely trigger a larger scale “tech” correction.
Dow Jones Transportation Index (DTX)
DTX could prove to be a great short trade once that very steep trendline breaks. Sell in May… and cover shorts on a medium-term moving average? Yeah that sounds like a decent plan.
Brent Crude Oil
Brent has been trading well inside the small channel. Our thinking is that if we see a bearish sentiment shift in May, we could see brent breaking this small channel to the downside and testing the longer-term (primary) trend support around $56. For now though, we need to wait for a clear signal to act.
Gold is looking a bit worrisome. The short-term (tertiary) trendline has broken. So far the $1765 level has been holding as support, but both the Stochastic and MACD are starting to signal “Sell in May” (funny that). Our short-term long trades (CFD) in gold stocks have been stopped out and we are awaiting another opportunity. We are open to the idea of a gold rally in the event of a sharp equities selloff, but for now we are patiently waiting for a clear signal.
Welcome back to R14.50. We’re inclined to think that the few weeks spent below R14.50 was a fake breakout… Let’s see what the week ahead holds for us.
U.S. Dollar Index (DXY)
Weekly chart on the DXY here. It looks like the DXY might have formed a bit of a base to trade higher from. Potential narrative here could be “stronger Dollar as investors seek safety during seasonal market rout”? In other words: “the sell in May crowd are making us scared and we want USD and treasuries to feel safe”. Let’s see how it goes.
Dogecoin: Maybe there is some “Sell in May” on the moon? We should go have a look!
A $30bln meme… it’s amazing.
BTC has been a little wild over the last few weeks, but honestly, that is not at all outside of the ordinary. Our game plan and view (and end of year price target) remains unchanged.
South African trade ideas
JSE Top 40 Index (ALSI)
Well just put this ALSI chart down right over here and step away slowly. Sell in May, they say…
AngloGold Ashanti (ANG)
We had some short-term long trades open on gold stocks which were stopped out during the course of last week (mostly at break even, thankfully). We like this bullish setup on ANG though as a very high risk-reward trade. Although the risk-reward ratio on a new long trade here is insanely high, be warned. If that R293-R294 level breaks, it’s good night nurse ANG. Perhaps the better way to play this setup would be to wait for a break of the support level and then to, wait for it, sell in May!?
ABSA Group (ABG)
We’ve seen a decent uptrend for a few months now, although the move is starting to feel a little long in the tooth. By our count, this is now the 6th time this trend line is tested. ABG did close below the trend line and the 89 day moving average on Friday. Maybe the time for the pullback is here?
Astral Foods (ARL)
Bullish setups that make you go “mmmmm”… ARL is looking rather interesting for a speculative long trade. Be careful of not trading too big here, illiquidity could lead to nasty slippage if you need to stop out.
Blue Label Telecoms (BLU)
This bearish setup is looking pretty good. A break, retest and follow through. Sell in May, all the way!
British American Tobacco (BTI)
Oh no, they’re going to ban menthol cigarettes… again. Whatever will the tobacco industry do?
Likely not really care very much as regulators are not moving against tobacco liquids (vape) and that is probably where the most growth is going to come from over the next decade or so. Also, they could keep relying on their totally addicted global customer base..?
Nice range trade here. A weaker ZAR will help.
Investec (INL + INP)
Time to take the money on INL (and INP) we think. Sell in May, book your profits and have a nap. That doesn’t rhyme, but you get the idea.
Tiger Brands (TBS)
The hammer on TBS gave us a day’s worth of bounce. The stock seems to have fallen apart since then. We like TBS for a short trade based on the range break.
TRU is looking like it could be a decent short around the resistance area here. R30 is some 40% lower than where it is now, so we’re not sure that it will make it all the way back down there. At least, not very quickly. Sell in May though, they say… and a month is a long time in markets, so let’s see what happens.
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*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.