Dancing close to the door

It’s been a bit of a bumpy ride these last few weeks and there are many mixed signals around. Thus, we are trying to hold our opinions rather loosely and stay willing to change our minds whenever new evidence emerges that might contradict our views. Dancing close to the door is what we are constantly reminding ourselves of, as we might have to bail on some of our ideas rather quickly if our views turn out to be wrong. That said, let’s look at some trade ideas.

Bigger picture (offshore trade ideas)
S&P 500 (SPY)

Not only has SPY broken the uptrend line that has been in place since the beginning of the year, you might also see a head and shoulders pattern that has been forming since June. Should the neckline of that pattern break, we might see SPY trading all the way down to $418. For now, our bias here remains bearish.

Nasdaq (QQQ)

QQQ has a very similar setup when compared to SPY. Again, our bias is towards the short side. As a side note, we noted that even after an incredible earnings beat by NVDA, it didn’t manage to hold onto the highs it printed during the after-hours session when results were released. This confirms our bearish bias and make us think that being long U.S. tech stocks is risky business and we have to be dancing close to the door (aka. be ready to bolt out ball when the pawpaw’s start flying towards the fan).

MSCI All Country World Index (ACWI)

Here is where we get into mixed signal territory. While you could argue that the setup looks somewhat similar to those on SPY and QQQ, we want to point out the reverse bullish divergence on this chart. You will notice that the very same divergence is present on both the SPY and QQQ charts. This serves as a good reminder that even strong opinions must be loosely held. We think that the market should come down and are positioned accordingly, but we could be wrong in our view and might have to react rather quickly should the market not do what we expect.

Platinum

Right then, let’s talk about buying opportunities. We had this little bounce pinned on Platinum a few months back, then we saw the reversal and a retest of the lows followed by another bounce. We like Platinum here, in particular a platinum stock which we will get into in the local trade ideas section a little further down. Once Platinum can close and hold above $990, it’s only up from there we think.

Brent Crude Oil

Brent is still dancing close to the door… uhm, close to the upper resistance level. We’d like to see it break higher, but for now we have to be patient for a clear signal. We still like Sasol for a long trade from support (we’ll show the trade a bit further down), but it very much depends on whether or no Oil makes a move to retest the lower end of the range it’s been stuck in since the beginning of the year.

USDZAR

While we don’t really have a very clear view of the ZAR right now, we do think that should BRICS nations start to settle trade in local currencies, it will be very good for the ZAR. We’ve hear that the BRICS have agreed to go ahead with local currency settlements for trade between BRICS nations, now it’s just a matter of implication. Overall, and this might not be the popular opinion but, we think that is a strong positive for our economy.

South African trade ideas
JSE Top 40 Index (ALSI)

About as clear as mud… All we can comfortably say here is that the 66955 level is big. You could trade for the bounce (using a tight stop), or wait for the break and sell into a potential move to 64000. Right now, for us, there is no setup. It does look like the last week has made a bit of a bear flag, but there is also some reverse bullish divergence. So, flip a coin? Either way, watch that 66955 level. There will be a good risk-reward trade to be had in either direction there. Just remember, dancing close to the door is a very good idea.

Aspen Pharmacare (APN)

APN is sitting right on the previous resistance level at R186-ish. There is a good risk-reward long trade from this level, but again, dancing close to the door means tight stops.

Naspers (NPN)

Well, NPN neve broke out the top of the range and is now making its move down to the bottom of the range. Maybe a sneaky long trade from sub-R3000 is the best way to play it now?

Remgro (REM)

Is that a bull flag on REM? It might just be. We like the long trade here.

Sasol (SOL)

SOL is once again testing the support level around R230. If we see Oil give back some gains and head to the bottom or its range, we might see SOL break down below that R230 level. Until then, we stay bullish. Keep disciplined though, because below such a long-term and significant support level the move could be big and fast. Keep dancing close to the door.

Compagnie Financiere Richemont (CFR)

When the trend line broke, it was game over. Friday’s close was on the lows as well, so while we cannot tell how much further this move goes down, we imagine that there is still some meat left in it. If you are short here, you could probably add a little and move your stop loss lower down (to around R268-ish).

Capitec (CPI)

It’s not looking good for CPI. It’s hanging onto the downtrend line for dear life. Maybe this is just a thorough retest… but maybe it’s a complete failure to break out. We can also see a small head and shoulders pattern. We think it’s probably best to abandon longs here for now.

Impala Platinum (IMP)

IMP is looking like a gem to us. Well, let’s see how results go (due out on Thursday next week). The market seemed a little disappointed when guidance came out indicating the dividend will not be as big as what most had hoped for. That said, results are due soon and there might be some upside surprise nonetheless. Lots of upside to be had here if earnings and dividends are beyond expectations.

Sibanye-Stillwater (SSW)

It’s also almost earnings time for SSW. Like with IMP above, we think the worst might be over here and that the time to buy is upon us. Earnings next week will be our guide.

Join a winning team

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
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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.

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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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