Markets bounced pretty hard last week on the back of an options-led squeeze, and it’s fairly likely that we see more of the same in the coming week.
Offshore trade ideas
S&P 500 (SPY)
Everyone was bearish… too much so I suppose. In the second half of last week markets bounced really hard, led by U.S. markets. Currently I’m thinking that we’ll see a rather strong market heading into the 16 September options expiry (call it an options-led squeeze). After that, perhaps we see the rug pull? The thing is (illustrated below) that put options volumes exploded as everyone and their donkey got ultra-bearish. Of course, the writers of those options don’t like losing, so here we are with a massive short squeeze going into options expiry. This doesn’t change the medium-term bearish view I have, but it does present some short-term guidance for the more active traders out there. When everyone is running in the same direction… the market will figure a way to bring max pain to the crowd. And right now, the pain trade is higher.
Nasdaq (QQQ)
Some bullish divergence on the QQQ’s. Does it go on to make a higher high? Let’s see.
USDZAR
Looking at a weekly chart here on the USDZAR. Doji candle formation at significant resistance, plus a ‘strong’ equities market backdrop. I think we ‘firm up’ this week. Note however, a few counter-trend candles do not change an overall trend.
Brent Crude Oil
Well then… the trend line broke and has been re-tested. I’ve added the green horizontal (old resistance, now) support level in top act as a guide. Perhaps we just saw a ‘fake break’ from the up-trend, or perhaps we’ve seen the up-trend come to an end? I have a feeling that in the coming weeks, that green support level is going to be the one to tell us which of those scenarios is the correct one.
Gold
Gold is still range bound so there is nothing really new to report here. That said, the range support is holding and if later on we do see a continuation of the bear market, this might be a good time to get involved in gold.
South African trade ideas
JSE Top 40 Index (ALSI)
I’m not changing my target price (53k), but it certainly does look like the ALSI might test 65k before it heads lower.
Aspen Pharmacare (APN)
APN has been in a down trend for a while now and I have held some downside target. Now however, I am changing my mind. With the new production facility in South African starting to add some value and the potential for APN to get more vaccine production and distribution rights on the back of the new facility, I think the time to buy some APN might finally be here again. The chart also looks like is trying to base out and break the down trend. It seems like a good time for longer-term traders and investors to start getting in.
British American Tobacco (BTI)
Is that a big flat top triangle in your pocket, or are you just happy to see me? The formation targets around R840. Need to wait for the confirmation though.
Capitec (CPI)
It’s not often that CPI misses earnings (ever?). R1900 is a key support and if that goes, it looks a little ugly.
Life Healthcare (LHC)
A nice, simple, clean long trigger on LHC. Maybe up to R23 this time?
*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 resource