Unum Capital: 5 Technical Trading Opportunities

Unum Capital: 5 Technical Trading Opportunities

Dear Trader

The strong appreciation of the South African Rand, lower oil prices and the stabilization of equity markets globally has seen domestic JSE shares make a strong move on the upside as traders make a short term shift into riskier assets. Combined with the aforementioned factors, the expectation that interest rates in the United States would not be increased at the previously anticipated rate saw equity market buyers return to support the market.

While the Rand has appreciated, traders would be wise to consider taking advantage of a strengthening local currency by positioning themselves to participate should we see a return to a weakening trend.

Today, five trading opportunities are on my radar:

#1. Mr Price Group (MRP), R251.69

Following it’s peak of R296 in March of this year, MRP has traded in a downward trend, stabilizing in June after which we saw a sideways range develop. Throughout the 5-month period since, the share’s 200-day moving average has started to wane, showing a loss of upward momentum and is now in the early stages of turning lower. The price, with a last close at R251.69, is a just above the long term moving average and testing the prior breakdown level while the Relative Strength Indicator (lower panel on chart) is rolling over at resistance. We also see the price retracing from the upper boundary of the upward sloping channel that has been in development since 31 August.

With Consumer Confidence for the third quarter having been reported at the lowest level this year (prior readings of 26 and 22), the relatively high valuation on retail shares may see some “cooling down” as the market potentially starts to discount lower levels of confidence and spending.

At current levels, the idea would be to short/sell the share in anticipation of potential weakness ahead.

These are the trade levels: 

Short/Sell MRP on an intraday move back above R254
Stop-loss: R268
Take Profit Target: R235

#2. Tiger Brands (TBS), R270.43
A national health scandal (Listeria), a strained South African consumer, stagnant revenues and declining headlines earnings has seen the share price of FMCG company Tiger Brands continue to struggle throughout 2018. Since reaching a low of 239.82 on 11 October, the price has rebounded, testing a short term high of R290. Over the last two weeks the share has traded in a sideways range, however the candle formation/structure reflects potential buyer fatigue as well as selling pressure. The short term moving averages are starting to reflect a downside bias while the current move lower in price is being accompanied by elevated volume.
On this basis traders could look to short/sell the share in anticipation of a move lower.
These are the trade levels:
Short/Sell TBS on a intraday print above R273
Stop-loss: R286
Take Profit Target: R247


#3. Nedbank Group (NED), R268.10 – On Watch-list
This past week, three South African economic data points highlighted the underlying weakness across consumers as well as business. On Tuesday, Q4 Business Confidence came in at 31 versus a forecast of 40 and prior reading of 34. On Wednesday, Consumer Confidence came in at 7 versus a forecast of 17 and prior reading of 22 while Private Sector Credit also came in below forecast with a reading of 5.82% versus an expected reading of 6.5%.
With the Rand having gained, banking shares have moved higher, with NED having appreciated from R223 to R272. The price currently trades just above it’s 200-day moving average, where it may encounter resistance however I am looking at the overhead resistance as a potential distribution zone. This comes in at around the 281/283 level. Should we see the price test this level, one could look to short/sell the share, using a stop-loss of R291 and take profit target of R255.
For now, NED is on my watch-list. To trade Nedbank or place an order in the market, contact the trading desk today.

#4. Anheuser-Busch Inbev (ANH), R1057.53
A strengthening South African Rand, move away from defensive stocks due to rising rates as well as a concerns over debt levels has seen the share price under pressure for a number of months, continuing to decline from it’s highs and recently testing lows near the R1040 level. From a technical perspective the share is starting to signal the potential for short term gains, with the following key drivers:
1. RSI bullish divergence.
2. An early pick-up in volume.
3. An early stabilization of the 20-day moving average with the price attempting to regain this level.
Based on this, traders could look to take a short term buy/long position.
These are the trade levels:
Buy ANH on a close above R1066
Stop-loss: R980
Take Profit Target: R1250

#5. Alternatively, traders could look to enter into a pairs trade as follows: Long Anheuser Busch Inbev / Short Diageo PLC. Please chat to Unum Capital Trading Desk around pairs trading opportunities. 
 
The pairs trade or pair trading is a market neutral trading strategy enabling traders to profit from virtually any market  conditions: uptrend, downtrend, or sideways movement. This strategy is  categorized as a statistical arbitrage and convergence trading strategy. 

Please chat to the Unum Capital Trading Desk to take advantage of any trading opportunities.
All the best,
Lester Davids
Unum Trading Desk Analyst
e-mail: clientservices@unum.co.za
Tel: 011 384 2923

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