We are stock traders and investors and generally advise that people not invest too heavily into cryptocurrencies. There are many risks yet unknown in the space, and even more scams making the rounds. That said, we’ve always been vocal about our view that cryptocurrencies have massive potential and that in general it would be wise to have some cryptocurrency exposure. Our view has been that one should treat cryptocurrencies much like you would treat any normal individual stock in your portfolio. With the recent rout in cryptocurrencies, we think that it’s time to buy bitcoin. There are many loud voices out there right now (let’s call them paper hands) that are ranting on about how bitcoin is dead… ignore them. Treat it like a normal stock, don’t take massive (or geared) exposure and don’t bother about the opinions of the paper hands. It’s time to buy bitcoin.
S&P 500 (SPY)
SPY has been tricky over the last two weeks. It seems to have formed a range, with range support coinciding with trend support. Stepping back a bit, we note that the trend is up and that downside momentum is fading. A confirmed bullish break from that range could provide a decent short-term long trade with clear risk management parameters. That said, the market in general is rather long in the tooth. Even though we remain bullish in the very short-term, we are concerned about the sustainability of the bullish trend in the medium-term. We feel that, especially for longer-term investors, it would be prudent to start thinking a bit more defensively.
Russell 2000 (IWM)
IWM is starting to look rather interesting. It’s approaching the longer-term trend line and forming a small wedge in the process. It is important to note that ‘market correction’ can also come in the form of a sideways consolidation, allowing the trend line to catch up to price before a trend continuation move takes place. In other words, this slow drift sideways over the last three-or-so months could count as a correction. This of course depends on how IWM reacts once it tests the (blue) longer-term trend line. Our view? Currently; be patient and wait for a decent long entry off the longer-term trend line, or once the wedge formation breaks. Much time needs to pass before either of those two setups happen though, so for now there is not much for us to do really.
Despite the general warnings above, we do think that taking a long position in QQQ could be a good play for the coming weeks. In the short-term, the overall market still feels like it wants to trade higher and QQQ if offering a decent trend following setup. Momentum is shifting upward once more and trend support held well. Stop loss would be below the trend line, around $315. Once clear of previous highs, you could use a 2 day low trailing stop.
Dow Jones Transportation Average (DTX)
DTX is a bit worrying. It has been trading in a very tight channel for some time and has now finally broken out it. This brings an end to a really strong rally. Momentum has turned rather bearish too. We’re expecting for DTX to move down into the area between the 50 and 89 day moving averages (1500 to 1400).
Gold has broken the recent short-term downtrend by breaking both they key resistance around the 200 day moving average and the downtrend. From a longer-term perspective, Gold is once more in a bullish trend. In the very short-term though, we would not be too surprised to see Gold retest the $1850 breakout levels. If the $1850 level/zone can hold, we should be setting up for new highs for the Gold price in the medium-term.
Platinum miners have been under pressure in recent weeks and looking at the Palladium price might help put that weakness in context. Palladium is approaching support around $2700. Let’s see how it holds (or fails) once support is tested.
Platinum has also been under some pressure for the last few weeks. As is the case with Palladium, there is no real immediate high probability play here, although a bounce from the $1140 level is a strong possibility.
Brent Crude Oil
We can’t ignore the possibility of Oil forming a potential double top. For now there is no play in Oil for us, although we’d be interested in buying if Oil makes it down to the trend line support.
U.S. Dollar Index (DXY)
Although the overall trend here is down for DXY, we note some bullish divergence could lead to a bounce in DXY. Perhaps a retest of 91?
We suspect that the fate of the USDZAR lies firmly in the hands of the DXY. Should the divergence in DXY not lead to a stronger USD, we could still see the USDZAR trade towards that R13.50 level.
Weekly logarithmic chart.
We marked out the $35k level a good number of weeks ago. BTC has now, rather dramatically, dropped to test the $35k level and we think it’s time to buy Bitcoin. 45% corrections are not out of the ordinary for BTC from a historic price action perspective, so as long as you are not geared or overexposed, BTC is offering a great buying opportunity. Remember though, treat BTC like it is a normal stock and do not allocate more to it than you would normally allocate to a stock in your overall portfolio. If you can do that, then it’s time to buy Bitcoin.
It’s time to buy Bitcoin? It’s also time to buy Ethereum. ETH has similarly dropped to a key level and we think this is a good level to buy some.
Where to buy cryptocurrencies?
We get asked a lot if we are able to help people buy Bitcoin or other cryptocurrencies. The short answer is no, we cannot. We do however recommend that if you want to buy cryptocurrencies, that you buy them through a reputable exchange, such as;
These are all ‘spot’ markets / exchanges that will allow you to buy the actual underlying cryptocurrency. It’s time to buy Bitcoin, yes… but it is never time to use gearing to buy it. Rather buy the real deal from a real exchange. Do not use leverage.
South African trade ideas
JSE Top 40 Index (ALSI)
We don’t really have a good read on the ALSI at the moment. The ALSI is still in a support zone, although Friday’s candle does not inspire much confidence. We’ll be sidestepping this instrument in the week ahead.
Reinet Investments (RNI)
RNI could be offering a decent long entry at the bottom of a weekly symmetrical triangle. With a stop below R260 and a solid weekly setup, this could be a great trade back up to the R340 level or higher. Note this is a weekly timeframe and that this trade will take rather a long time to play out.
SHP trade is off to a good start. Stops to entry (or break-even after costs) with offers in for target prices.
We’ve stopped out of our CFD long trade on SOL. From here we wait patiently for another setup. Depending on how Oil trades, there could be a decent short trade to R180 on the cards here. We’re going to be a bit cautious and just do nothing for now. Our fundamental view is bullish, so we’ll rather wait for another chance to get long.
Compagnie Financiere Richemont (CFR)
CFR has broken the range it has been consolidating in for some time. Although the close on Friday was in the middle of the daily range, we think that we could have seen a breakaway gap. We are currently (still) long CFR and will be using a trailing stop loss from here.
Old Mutual (OMU)
OMU has been on our radar for a while. It once again attempted to break the downward sloping trend line on Friday. Once that trend line break is confirmed by a daily close, we think OMU offers a great long trade. From here, our initial target is R15.
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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.