Another week that continued to present a challenging trading environment. While sticking to our disciplined trading strategy has been difficult amid the recent chop, we’ve focused on risk management. The JSE experienced sharp selling pressure this week despite a lack of specific stock-level catalyst news, pointing largely to broader foreign outflows from the market. Notably, we saw multiple broker upgrades in the banking sector during the week, which failed to stop the sector’s sell-off.

As we wrap up the week, we firmly believe that our positions are fundamentally sound and that we are sitting on significantly undervalued levels following the recent weaknesses.

Last week

Macro Catalyst

Global stock indices experienced downside volatility before stabilising, while Treasury yields pushed higher as bond markets priced in higher-for-longer borrowing costs following the Federal Reserve’s recent 25 bps rate hike to 3.75%–4.00%. On the domestic front, the South African Reserve Bank increased interest rates by 25 basis points, and the JSE saw a large sell-off.

Closed Trades (Take Profit)

Gold (XAUUSD)

• Trade Logic: We initiated a short position on Gold at the same entry price as our previous trade. After our previous stop loss was triggered, we re-entered to capture a short-term tactical pullback.
• Status: Shorted at $4,318.5, and closed at $4,277.25.

Active Open Trades

Thungela Resources (JSE: TGA)

• Trade Logic: Along with Exxaro (EXX), Thungela experienced a few sharp days of decline. With a strengthening US Dollar, we anticipated that the stock would benefit from hard-currency tailwinds.
• Status: Active. Bought at R121.80. Currently showing a small unrealised loss.

FirstRand Ltd (JSE: FSR)

• Trade Logic: FFirstRand formed a clean bull flag pattern and confirmed a technical breakout, triggering our initial long entry.
• Status: Active. The stock formed a clean bull flag pattern and confirmed a technical breakout, triggering our initial long entry.
• Position Addition: Following two major broker upgrades on Wednesday, we added a half-position (bringing our total allocation to double the standard positions) with the expectation of a positive daily response. Unfortunately, broader market selling muted the impact.

BHP Group Ltd (JSE: BHG)

• Trade Logic: BHP continues to trade within a defined range between R680.85 and R754.58. Anticipating that a recovery in iron ore prices will support upward momentum, our price target remains the upper channel bound around R754.00.
• Status: Active. Bought at R701.05. The stock is currently showing a small unrealised loss, following a tough week for resources.

Anheuser-Busch InBev SA/NV (JSE: ANH)

• Trade Logic: Initiated as a defensive hard-currency allocation. Alongside Exxaro, ANH benefits structurally from Rand weakness against the US Dollar.
• Status: Active. Bought at R1,304.49. ANH continues to hold above key support, so we are maintaining patience with the position.

Exxaro Resources Ltd (JSE: EXX)

• Trade Logic: Exxaro carried strong upward momentum into the week. It also stands as a key beneficiary of a firming US Dollar.
• Status: Active. Active. Average Entry at R196.83. It’s currently trading at an unrealised loss. Exxaro has slipped below its previous support level at R180.00, and we are monitoring it closely, ready to make an exit if the risk parameters are breached.

Mr Price Group Ltd (JSE: MRP)

• Trade Logic: Carried over from three weeks ago. Mr Price continues to trade within a tight sideways range, characterized by alternating gap-up opens and lower closes. We have lowered our profit target to lock in gains, rather than risking a reversal.
• Status: Active. Shorted at R160.51. Currently sitting at a slight unrealised loss; however, the position is earning positive swap interest. For now, we are comfortable holding our positions, unless our stop loss is triggered.

Compagnie Financière Richemont SA (JSE: CFR)

• Trade Logic: CFR completed a distinct head-and-shoulders top formation. We initiated a tactical short position targeting further downside expansion.
• Status: Active. Shorted at R3,539.13. Currently showing modest unrealised gains.

Mondi plc (JSE: MNP)

• Trade Logic: We made a trade recommendation during one of our morning calls, based on the pattern of a bullish flag-and-pole continuation pattern.
• Status: Active. Bought at R183.00. Mondi experienced a stronger showing last week before pulling back slightly. It’s worth noting that it has not broken recent lows, preserving the possibility of a trend reversal as we hold the position.

Discovery Ltd (JSE: DSY)

• Trade Logic: Initiated following a breakout above its long-term downward trendline.
• Status: Active. Bought at R264.14. Currently showing a minor loss following a pullback; however, Discovery continues to print higher highs and higher lows, keeping the broader uptrend intact.

Reinet Investments S.C.A. (JSE: RNI)

• Trade Logic: Reinet continues to trade at a substantial discount to its underlying net asset value (NAV).
• Status: Active. Bought at R447.00. The price action remains range-bound. We are managing our position size, while remaining positioned for Reinet’s historical tendency toward rapid NAV catch-up rallies.

Truworths International Limited (JSE: TRU)

• Trade Logic: Truworths was trading at a major historical support level that has repeatedly held over recent sessions. We initiated a long position to capture a technical bounce off, shown by the orange line in the chart below.
• Status: Active. Bought at R42.31.

Closed Trades (Stop-loss)

Nedbank Group Ltd (JSE: NED)

• Status: Closed at a loss. We bought in at R298.13 and sold at R292.75.
• Details: We initiated a tactical short after NED formed a head-and-shoulders top on the daily chart. However, strong buying momentum pushed the stock higher and triggered our stop loss.

Sibanye-Stillwater Ltd (JSE: SSW)

• Status: Closed at a loss | Bought at R47.40 | Sold at R44.01.
• Details: We initiated a long position as precious metals demonstrated unexpected resilience, despite elevated interest rates and hawkish policy signals. But we made an exit, as broader resource pressure mounted.

Watchlist

Aspen Pharmacare Holdings (JSE:APN)

Trade Logic: Aspen was added to the SA Top 40 last week and reached a significant resistance level at around R160.90. On Monday, we saw it close above the level, while in the following two days it opened above, before dropping below. This could be an opportunity for a possible short as it displays an inability to move higher.

Capitec Limited (JSE: CPI)

Trade Logic: Capitec dropped significantly lower after releasing a trading statement that the markets did not like on 10 September. Since then, it has been bouncing off the 200-Day Simple Moving Average. We might wait until the earnings are released on 30 September, but this could be a possible buy.

Economic Data

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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.