We have to admit that today’s post was difficult to write. It is hard to focus on opportunities in the week ahead while our country appears to be… well, having a really rough time. We often say that we must filter out the noise and focus only on those things that can accurately analyse (aka. the chart), so that is exactly what we are going to do. Besides, the world’s financial markets are looking fairly good and we’ve positioned well for strength in the offshore portfolio’s. The only thing to do now really is to be patient and hold our positions.
Offshore markets
S&P500 (SPY)
Seven new all time record highs in a row… a pretty rare occurrence historically, and also one that has proven to be a reliable bullish indicator. While markets do not go up in a straight line and it is generally advisable to wait for a pullback to ‘buy the dip’, as they say, it is also not wise to trade against what is clearly a very strong trend. Two weeks ago we said ‘buy the dip’, last week we said ‘follow the trend’, now we say ‘hold on and be patient’.
Nasdaq (QQQ)
A breakaway gap pushing an all time high… bullish. Sure, things don’t go up in a straight line forever, but standing in front of a freight train going full speed will only get you flattened. The thing to do now is to hold onto the longs and be patient. Trailing stop losses are always useful in these situations.
Dow Jones Industrial Average (IYY)
Another U.S. equities index, another breakaway gap to an all time high. Despite all the worry out there, U.S. markets are looking strong. We’d not be surprised to see a week or two of slow upward grind here from U.S. markets before any buyable dip emerges. Now is a time to look around for things we want to buy when next we get a chance.
Russell 2000 (IWM)
Well ok, it’s not all sunshine and roses. The IWM has not made new highs for some time now. Perhaps some cold water, but on Friday overall U.S. market breadth reading was: 43% advances, 50.2% declines and 6.8% unchanged. Counted as individual stocks rather than percentages, that’s 3,794 advances, 4,429 decliens and 597 unhanged. So while most of the major indices are in a very bullish configuration, most of those decliners come from the smallcap space. Thus, seeing a bullish break on the IWM would be supportive of the bullish breakaway gaps in the larger-cap indices shown above. Should we see the larger-cap indices keep pushing higher, while IWM trades towards the lower end of its current range, there might be some reason for concern and heightened caution.
Dow Jones Transportation Index (DTX)
Over the last few weeks the DTX has not participated in the upside enjoyed by industrials and tech. The DTX has however pulled back to test both the 89 day moving average, as well as the current primary uptrend line. We think that it offers a good long entry here, using the current primary uptrend line as a trailing stop loss.
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Gold
Gold is looking a little dicey at the moment. Looking at the weekly chart, we see that it tried to break out of the recent downtrend, although failed gloriously. The 89 week moving average is holding well as support for now, but where to from here is not something we are willing to place a wager on right now. We’ll just be casual observers of this market for now.
Brent Crude Oil
Weekly chart on Brent Crude Oil. Not much to do but to hang on to the energy longs and be patient. The trend is strong with this one.
U.S. Dollar Index (DXY)
Not too much has changed on this chart over the last week. For now the potential trend change is still on the table and we would still like to see a move above $93.50 to confirm.
USDZAR
R14.50 put up a fight and it seems that the momentum is starting to swing toward bullishness again. As is the case with the DXY above, we can’t make any new calls here until we have some further clarity in terms of the potential trend change. Also, let’s be honest… this whole Zuma splitting the ANC in two situation that is happening right now, could be an unforeseen risk with an unknown impact. Also, if you squint your eyes just right, can you see an Inverse Head and Shoulders there?
Bitcoin (BTC)
And so another week passes and yet again the support holds… We have to admit, this is making us more and more bullish.
Ethereum (ETH)
ETH is an entirely different animal compared to BTC, but even so, it is looking mighty bullish in our view. ETH is also holding a key support level and we think that FOMO driven madness is yet to begin.
South African markets
Aspen Pharmacare (APN)
When looking at the weekly chart, it is interesting to see that the 200 week moving average has been putting up a fight for a few months already. We remain trend followers here and think that once both the overhead resistance and the 200 week moving average is broken, we should see APN testing the upper end of this channel around the R180 – R185 mark.
When looking at the daily chart, we can see that momentum is starting to turn a little more bullish again. Maybe this is the week that we see APN break and hold above the resistance?
NewPlat ETF (NEWPLT)
It may be a little late to get the best possible entry into this ETF, but from the looks of the current weekly chart then trend is changing and we want to be long.
Blue Label Telecoms (BLU)
BLU has been trading the range for a few months. If the big can hold above R4.80 in size, it might be worth lifting.
Gold Fields (GFI)
Some ‘hopium’ for the gold bugs. GFI has found good support around here in the past and momentum is turing bullish. Perhaps we see a bounce to R170?
Naspers (NPN)
NPN has been holding this support for a good while now. If this level breaks downward, it might get very messy very quickly (but probably also provide the best buying opportunity in this stock in many years – for the brave and the patient that is).
Technically there are four potential trades on the table here; 1. buy the bottom of the blue range with a stop loss below R2900, 2. sell the bearish break of the blue range and cover on bounce, 3. wait for a bullish break of the blue range and buy into strength with an eye on the previous highs as a price target or, 4. in the event of a bearish break of the blue range, wait for maximum panic to grip the market and try get a long-term long position on at a much lower price. How you play it is up to you.
*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.