It’s an age old saying in the market, and for good reason. The trend is your friend. Often we try to fight it and mostly, it wins the day. Markets are currently trending higher, and thus our plan is to find opportunities to get onboard with the trend and allow it to make the returns for us.
Offshore trade ideas
S&P 500 (SPY)
That looks like a new record high close. $430 doesn’t seem like such a stretch from here.
Russell 2000 (IWM)
This pennant looks like it might attempt a bullish break in the week ahead. Momentum indicators also ticking the bullish boxes. Perhaps we see small caps become the market leaders again in the coming quarter?
The Nasdaq has held its support line very well. From here that QQQ looks to be trading higher. There might be some resistance around that $338.20 area, although once that resistance is cleared it does look very much like the trend will keep grinding higher.
U.S. Dollar Index (DXY)
DXY is currently in a strange place for us. In our first chart (daily), you can see that there is some bullish divergence and a relatively decent looking setup for a bounce toward the $92 level.
When looking at the weekly chart though, we can more clearly see the importance of the $89 level. Right now it is too early to be able to tell, but we could be looking at a trend change scenario. With $89 being the floor/support and a potential upside target of $100. This is our base expectation, although a break below $89 will open for more U.S. Dollar weakness. For now, we’re just watching this index with interest. As mentioned, our base expectation is for $89 to hold and for the U.S. Dollar to strengthen into the second half of the year.
The weekly USDZAR chart is a great testament to ‘getting caught up in the noise’ and a reminder to keep the longer-term picture in mind when doing shorter-term analysis. Our question is now; does the USDZAR find support at R13.23 zone and bounce to the top of the ‘Historic large range’, or does it overshoot and head for R12? We know that the USDZAR has a tendency to overshoot, but we think that now is probably a relatively good time to buy some USD and send it to the offshore accounts.
Brent Crude Oil
Oh we live in the hopes and dreams that we will eventually get an opportunity to add to oil longs on that upward sloping trend line. Alas! Oil does not seem to understand the concept of a correction at the moment. Upside targets of $75.58 and $86.71 seem a little closer now that Brent Crude has made a new weekly high.
Just ignore the hype and news and ridiculousness of the Bitcoin 2021 conference. BTC is holding the $35k level rather well on the weekly chart. We think that once BTC reclaims the $50k level, the FOMO traders will rush in again and push it to new highs. We’re about halfway through the ‘parabolic rally’ year in the four-year cycle. We need to be a little patient with it now.
Our thoughts around ETH are very much in line with those on BTC. We just want to point out that, at least from a historic perspective, extreme volatility is ‘normal’. During the last parabolic cycle, ETH made a 67% correction without flinching. The recent correction was not quite as bad. There are still six month left in this current phase though, so be prepared for some wild swings. Always remember, do not over-gear yourself on these cryptocurrencies.
South African trade ideas
JSE Top 40 Index (ALSI)
ALSI is still range bound. There is some merit in trading the range, although we’re more interested in trading the break out from this range. Our bias is also toward the upside. We think that a stronger USD will likely continue to be supportive of both precious metals and general commodities, and in turn be supportive our our entire market. There is a case to be made for ‘value’ investors flocking to our market to buy some bargains. In general, we’re bullish.
Anglo American PLC (AGL)
AGL, the gift that keeps on giving. Another decent trend following long setup. After all, the trend is your friend.
Aspen Pharmacare (APN)
We’ve been seeing some decent long setups/charts floating around twitter over the last few days, and we agree with most of them. The upper end of the channel approaches. R175 – R180 target price.
BHP Billiton (BHP)
BHP has also been making the rounds a little over the last few weeks with this Head and Shoulders pattern. It ticks all the boxes; a clearly formed Head and Shoulders pattern and reducing trading volume during the entire formation. We are somewhat hesitant though. What worries us that is literally everyone is seeing the same picture. This does not mean that everyone is wrong… they might just be right and turn out to be the very force that allows the pattern to play out. As mentioned earlier, we are rather bullish the USD and commodities in general, so it follows that we are bullish on resource counters as well. Should BHP manage to get and hold below R400 (the 200 day moving average) we might change our tune, but for now, we think that when everyone is looking left, go right. We think BHP could be a decent buy/long from these levels.
BID Corporation (BID)
BID has held the 200 day moving average very well, and thus the longer-term trend change narrative is still firmly in place. We’d like to see a break above R300 and a move toward R320.
British American Tobacco (BTI)
BTI, the range that keeps on range-ing (we’re running out of puns). BTI has been in this range for a good few months now and once again it offers a very high risk-reward long trade setup.
Coronation Fund Managers (CML)
CML looks like it’s in trouble. Downside target at R47.50.
NTC is testing the top of its range. Our overall view here is bullish, although we would like to wait for a confirmed break of the resistance before making any moves.
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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.