Staying flexible in your views and convictions is a vital skill if you plan to survive in markets for a long time. At the end of the day, being right or wrong hardly matters. Being able to change your mind when you are wrong and remain convicted when you are right is really the only skill that deserves to be trained. We hope that explains why last week we switched slightly more bullish and took a fair few ‘we don’t know so we’ll wait and see’ stances. At the end of the day, the market will lead us and it is merely our job to follow. We often try to make sense of it, but in the process we forget that the market is largely driven by the interactions of millions upon millions of people… and people aren’t always so rational. So, the more we try to make sense of something, the less sense if makes. Logically, there is a recession on the horizon and tech is overvalued. The experience, or reality, is that people are continuing to buy stock regardless of what ‘seems logical’. So instead of fighting this, we must merely get along for the ride and make the most of it while we can, and hope to get off the ride before it collapses. All that said, let’s look at some charts.
Bigger picture (offshore trade ideas)
S&P 500 (SPY)
This rally feels a little long in the tooth, but it’s not for us to decide when it ends. A trailing stop loss is advised for those with long positions. For those looking to short, perhaps around $461 could offer a decent risk-reward, although for now we don’t think standing in front of the bus is a good idea. You could put up a tertiary trendline on the move from around June and use that as a potential short entry (or stop loss if you are long). Either way, dance close to the door.
Philidelphia Semiconductor Index (SOX)
SOX is still spending time hugging the upper end of the channel. We’d like to see it test the lower band, but it seems that we will need to be patient. You could probably put a mid-channel line in and use that as a trigger for any new trades here (aka. the short trade to the lower end of the channel). Just note that trading against the trend could be bad for your health.
See our comments on SPY. ‘Don’t fight the trend’ is probably the only thing we can say here. Well, we will say that we think this has gone too far, but we’ve tried that a few times and have not been right yet (at least not recently). So, we will be patient and wait for the market to lead the way.
Brent Crude Oil
Oil is looking good to hold the $78.85 level and make a push for $87.35.
Gold pulled back a little in the second half of the week, but overall the move toward the recent highs still seems to be in play. We would be buyers on weakness here, at least for the next few weeks.
U.S. Dollar Index (DXY)
DXY bounced off $99.50 and smacked right into $101. It’s too early to really be able to tell, but we think that we might see the Dollar get really strong again in the near future (aka. get and hold above $101 and head for $103). Will it test the highs around $114 again..? Maybe. It won’t happen fast if it does, but it is possible in a scenario where global economic conditions continue to deteriorate and investors are looking for safety. We also have to be mindful that we could see the U.S. stop with the hikes, which will attract capital into longer-term U.S. Government Bonds, which not only could be a good trade in itself, but also drive much strength for the Dollar.
Forex traders… are we seeing a good short here? Let us know what you think by tweeting us.
The USDZAR is forming a bit of a base here by the looks of it. We think we see some Rand weakness in the week to come.
Top Securities Broker Awards
Once again Herenya Capital Advisors is competing in the Intellidex Top Securities Brokers Awards.
Launched in 2010, the Top Securities Brokers survey (formerly Top Stockbrokers) is the Industry’s premier independent assessment of the industry.
The survey is based on a comprehensive survey of securities brokers as well as their clients, with high emphasis placed on client rankings of their firms across an extensive list of categories.
The online survey to find the top securities brokers in SA is now open, and we would greatly appreciate you taking the time to complete the 2023 online client survey and share your experiences.
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In the past year Herenya Capital has grown from strength to strength, not only have we been featured on some of the most revered platforms, but we have also been commended by our peers and our clients for our excellent service and tenacity to stay at the forefront of the finance industry. We also won the title of Best Stockbroker for Traditional Investors in South Africa. We would greatly your appreciate your support to help us take another title of two this year.
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South African trade ideas
JSE Top 40 Index (ALSI)
You can see what our thinking is by looking at the chart. The last two weeks have been, well, not in line with our thinking. So, we stay open to the idea that is might just keep pushing higher, but we really still don’t have any reason to believe that the market is bound to go higher. In other words, we remain bearish.
Oil price looking bullish, Rand looking weaker… spells good times for SOL if you ask us. As long as this base holds (green line), then we should be good to stay long.
Tiger Brands (TBS)
This little bear flag setup on TBS looking like it is starting to get going now. R135 calling?
Anglo American (AGL)
It’s beginning to work! There is a lot of upside in this trade in our view, so be patient and give it the space and time it needs.
Aspen Pharmacare (APN)
APN closed at the highs on Friday, breaking the overhead resistance (not drawn, but visible in the form of that thin dotted blue line) and opening for the next leg higher. R200 then R210 as short-term upside targets. R230 and R240 as medium-term upside targets.
City Lodge Hotels (CLH)
The CLH trade is working very well. We do think that there is more upside to be had here over the coming months, but perhaps taking some (a third, or even half) of the money off the table is not entirely a bad idea.
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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
|Minimum trade charge
|JSE listed equities and ETFs
|CFDs on JSE listed equities
|10% – 25%
|SAFEX listed index futures (ALSI)
|6% – 8%
|R20 per contract
Offshore stockbroking rates
|Minimum trade charge
|U.S. listed equities and ETFs
|USD 1 cents per share
|Canada listed equities and ETFs
|CAD 2 cents per share
|U.K. listed equities and ETFs
|GBP 12 + 0.1%
|Germany listed equities and ETFs
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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.