Trend following for the win!

We are all guilty of overcomplicating trading. Often we have to remind ourselves that most of the work is done by the market and that trend following is often the easiest way to interact with markets. This week we look at a few of the better trend following ideas we have for the week ahead.

Offshore trade ideas
S&P 500 (SPY)

Buy-the-dippers win again! SPY bounced well from the buying zone last week and has gone on to make a new all time record high. As long as the FED keeps the printers going brrrr, it’s going to be rather difficult to break this trend.

trend following
Dow Jones Industrial Average (IYY)

We don’t really have too much to add in terms of commentary on IYY. As is the case with SPY, the trend is strong and the index is trading at an all time record high.

trend following
U.S. Dollar Index (DXY)

Looking at a weekly chart here on the DXY as it helps create a bit more context. Over the last five or so years, the DXY has been range bound between the $89 level and the $100 level. It is still a bit early to tell, but it looks like DXY has formed a double bottom around the $90 zone during the last 6 months or so. It would need to breach and close above the $93.50 level to confirm the double bottom. Once confirmed though, it looks highly probable that the DXY moves back up toward the $100 level in the months to come (so let’s say, over the medium-term). Naturally that would lead to a weaker ZAR locally, but it would also be supportive of commodity prices in general.

USDZAR

The downtrend line has been broken and the USDZAR has spend some time above it. That puts the USDZAR in potential trend change territory in the medium-term. Considering the outlook on DXY above, that medium-term trend change is starting to look very likely. The USDZAR would need to get above R14.52 in order to have us take long positions on this currency pair.

Brent Crude Oil

A weekly close above the de Mark or Williams point of resistance. $86.71 here we come! It might take a few weeks though. Energy prices seem to still be a one way bet though.

trend following
Bitcoin (BTC)

All has not been so well in crypto-land over the last few weeks. BTC is desperately trying to hold this support level, and rightly so. The world and its uncle is seeing the Head and Shoulders formation on the daily chart… which makes us think that it will likely fail and BTC will see higher prices in the second half of the year. Time will tell. We remain bullish.

South African trade ideas
ABSA Group (ABG)

ABG offering a nice trend following entry here. Perhaps the perfect time to enter was mid-last-week, although the trend seems to be fairly well established and we think that entering a long here would be a rather safe play.

trend following
Aspen Pharmacare (APN)

The much anticipated breakout of the horizontal resistance failed. Now though, APN has pulled back into the buying zone for trend following traders. A small long entry here with a volatility based trailing stop loss is the order of the day.

trend following
Bidvest (BVT)

The small range on BVT might provide a good long entry if it is broken toward the upside. Momentum wise it is still a bit early to get a clear read, but from a trend following perspective, it might be worth getting involved in next week’s action is bullish.

Coronation Fund Managers (CML)

CML looks like a great long entry off the 200 day moving average. Momentum is turning up, the 200 day moving average held well, and overall markets are looking healthy and confident. Keep in mind that CML’s earnings will be highly correlated to global market performance (with a skew towards local markets, but in general, if markets do well, so do large asset managers).

Capitec (CPI)

CPI has for a very long time been the best performing bank on the JSE. So while the market is strong, it makes sense to be involved in one of the strongest shares. It’s not shown on the chart, but CPI has broken a small bull flag. Our thinking is that this stock could get to R1800 in the next two or three weeks.

trend following
Netcare (NTC)

Another fake bullish break in glorious fashion. NTC does look interesting around the 200 day moving average though. The thinking here is that we see a medium-term trend change and that NTC should trend higher over the next 12 to 36 months. A long entry here could play out well in time.

Remgro (REM)

REM has been on our radar for some time, with a similar medium-to-longer-term trend change play as with NTC above. REM has done a better job at establishing a its uptrend than many other stocks. Now it is offering a decent trend following entry as the stock is hugging the top of the buying zone. Again, a volatility based stop loss and a small trend following entry is the play here.

trend following
Telkom (TKG)

Some time ago we mentioned that it would be great to be able to pick up some TKG nearer to the trend line. As and you shall receive it seems. We happy to get into a trend following long trade here.

trend following
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 instrumentBrokerage rateMargin rateMinimum trade charge
JSE listed equities and ETFs0.30%100%R150
CFDs on JSE listed equities0.20%10% – 25%R50
SAFEX listed index futures (ALSI)R206% – 8%R20 per contract
Offshore stockbroking rates
Trading instrumentBrokerage rateMargin rateMinimum trade charge
U.S. listed equities and ETFsUSD 1 cents per share100%USD 2
Canada listed equities and ETFsCAD 2 cents per share100%CAD 2
U.K. listed equities and ETFsGBP 12 + 0.1%100%GBP 12
Germany listed equities and ETFs0.20%100%EUR 8
Forex0.40%100%USD 4

*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.

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Every week needs a new plan!

Markets change all the time. New fundamental drivers emerge, technical setups mature or fail and our trading plan must adjust in order to keep up with the ever changing environment. Every week we highlight some of the trade ideas that are generated within our client community so that you can stay on top of what we're looking out for and planning to trade at the beginning of each week. 

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