Last week we saw a bit of a squeeze from most global markets while China takes a break for Lunar New Year. We expect much the same this week, although in the second half fortunes could change as U.S. data and the FOMC interest rate decision could turn the tide. So, to squeeze or not to squeeze… that is the question?
Bigger picture (offshore trade ideas)
S&P 500 (SPY)
The downtrend line has been broken and although the market was not as squeezy’ as we thought it would be last week, it was a rather strong week, nonetheless. The real question now is whether or not this is a real trend change, or if this is a fake breakout and a bull trap? This is also a question that we think cannot yet be answered. For now, we think we are in for another strong week, of course, pending the interest rate decision from the Fed. The market is looking forward to getting some guidance from the Fed regarding the path for interest rates. As usual, it seems that the market is again ‘playing chicken’ with the Fed and betting on a pivot in policy. We think the playbook for next will be ‘strong into the Fed, and weak after’.
Nasdaq (QQQ)
Much the same applies to QQQ as commented above. It is just interesting to see that QQQ has managed to make a new high, which supports the ‘this is the bottom’ thesis of the bulls. Let’s see how this plays out. Just remember, even in the case that this is indeed the bottom, the market never moves in straight line and we are likely to see a pullback in the second half of next week.
Gold
Gold still trading at the top of a rather large and relatively long-term channel. There are signs that momentum is waning. Let’s see how it reacts to U.S. data this week though. There is the Fed obviously, but there is also monthly non-farm payrolls data which is going to be a big one.
Brent Crude Oil
Oil is still trying to stage a bullish break of this downward sloping channel and is still trading in a key support/resistance zone. We are open to the possibility that our channel is not correct, but only once prices breaks down from this zone and back into the channel will we be able to redraw this chart.
U.S. Dollar Index (DXY)
DXY is hanging onto this support level for dear life. It does look like it is basing out here nicely and from a purely charting perspective, looks set to start moving higher once more. A good time to buy Dollars?
USDZAR
The USDZAR chart is sort of in the middle of nowhere for us. We’ve highlighted the possibility of a much stronger ZAR as that trendline support could act as a magnet in the event that DXY (as shown above) breaks below its support level. If that happens, that would be a trigger to short USDZAR to that trendline below. In the event of DXY bouncing off support, it would be safe to go long USDZAR. In essence, there is no clear setup on the USDZAR itself (at least for us) and we will be taking our lead from DXY.
South African trade ideas
JSE Top 40 Index (ALSI)
Go ALSI, go! It looks a little like momentum is running out and a pullback is near. That said, we do not see a clear setup here and thus have no trade on the ALSI until a clear setup presents itself.
Anglo American PLC (AGL)
AGL is still consolidating in this resistance zone. This presents a good risk-reward setup for the patient trader. Wait for the break, in either direction, from this resistance zone and use a trailing stop to maximise the potential of this setup.
Anglo American Platinum (AMS)
AMS is looking good for a long trade. You could draw a small downward sloping trendline on the last month or so’s candles and use a bullish break of that as confirmation for a long entry. Momentum wise it looks good for a move higher though.
AngloGold Ashanti (ANG)
ANG will naturally take its lead from Gold itself, although we think that once price is back to the trendline as indicated, it will present a high probability trade opportunity. Definitely one to keep on the watchlist.
Aspen Pharmacare (APN)
APN is still in this range and is still looking like a medium to longer-term buy for us here. Short-term traders can try to trade the range, but we think the real power here is to buy for the longer-term once this range is broken to the upside.
British American Tobacco (BTI)
R642 needs to hold, else R583 opens up as a downside target.
Clicks Group (CLS)
Not all retailers are equal… CLS opens for a move to R239 after the R265 support is decisively broken.
Coronation Fund Managers (CML)
CML looks like it has made a nice inverted head and shoulders pattern on the daily chart. This presents a decent entry point for medium-to-longer-term traders and investors.
Sasol (SOL)
Very nice and clean break on SOL finally starting to run out of a bit of momentum. SOL will take its lead from Oil next week, so the path forward is not exactly clear. Traders who got long on this trendline break can likely lock in at least some profits here. We still like SOL for the long-term, so we’d be looking to buy if there is any weakness in coming weeks.
Sibanye-Stillwater (SSW)
A bit of a riskier play here on SSW, but we like it for a long from within this support zone. You could put up a downward sloping trend line to act as a confirmation before taking the long trade is you want to be a little more risk averse.
The Foschini Group (TFG)
Not all retailers are equal… TFG looks like a proper short after a break and retest of the support zone. New lows coming?
Vodacom (VOD)
That R120 level is still on the radar on VOD. Friday saw the stock bounce off it rather well. Keep it on the watchlist for a potential play.
Joining HCA trading
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Local stockbroking rates
| Trading instrument | Brokerage rate | Margin rate | Minimum trade charge |
| JSE listed equities and ETFs | 0.30% | 100% | R150 |
| CFDs on JSE listed equities | 0.20% | 10% – 25% | R50 |
| SAFEX listed index futures (ALSI) | R20 | 6% – 8% | R20 per contract |
Offshore stockbroking rates
| Trading instrument | Brokerage rate | Margin rate | Minimum trade charge |
| U.S. listed equities and ETFs | USD 1 cents per share | 100% | USD 2 |
| Canada listed equities and ETFs | CAD 2 cents per share | 100% | CAD 2 |
| U.K. listed equities and ETFs | GBP 12 + 0.1% | 100% | GBP 12 |
| Germany listed equities and ETFs | 0.20% | 100% | EUR 8 |
| Forex | 0.40% | 100% | USD 4 |
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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.
