Unum Capital Trading Desk Research - 20 May 2019

Unum Capital Trading Desk Research - 20 May 2019

Unum Capital Trading Desk Research – 20 May 2019
Unum Capital’s Trading Desk Research is a collection of general research, technical and fundamental observations, charts of interest, key technical levels as well as trade ideas that is produced to assists traders on the desk in identifying alpha-generating opportunities while simultaneously managing risk. These ideas may be immediately actionable or worth placing on the radar for a potential trade at a future date. Please note that trade ideas (including key levels) are subject to change as new information becomes available and price action changes.

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# Commentary Chart Link
1.  US Dollar Index (DXY) – following a brief breakout, the price has back-tested inverse head and shoulder formation. We are now seeing the continuation of the upward trend. https://www.tradingview.com/x/KlL5pPQ8/
2.  US 10 Year Bond Yield – US 3 Month Bond Yield: A widely watched recession indicator. Currently at inversion level. Came back to test the prior low and bouncing off that level. Break of downward trend will be positive and reduce recession fears. https://www.tradingview.com/x/k4dogNDB/
3.  US 10 Year Bond Yield: Double bottom formation building here. Now 2.40%. +2.70% cannot be ruled out. https://www.tradingview.com/x/wGsxWJEx/
4.  SA 10 Year Bond Yield: A look at the bigger picture and longer term monthly chart sees the price (yield) making a go at the overhead resistance and downward trend line that has been in place since December 2015. The setup also sees a 12-year cup and handle technical formation that points to higher levels. +12% cannot be ruled out longer term.    https://www.tradingview.com/x/TgL3Gxl1/
5.  USDZAR: Over the short term, the pair has broken out of a bull flag pattern, continuing in it’s medium term, rounding channel formation.This breakout coincides with a test of the 200-day moving average as well as the 50-day moving average which t he price has reclaimed. We are also seeing the formation of a larger inverse head and shoulder – that stretches back to 01-November-2018 as well as a shorter term formation that has been in development since early March 2019. https://www.tradingview.com/x/ugUvecfs/
6.  General Retail Index: J537 – Still sitting on a large double top as per monthly chart. Subdued retail sales, 27.6% unemployment and relatively elevated valuations puts this index at risk of a further de-rating (longer term). https://www.tradingview.com/x/74H31HbA/
7.  JSE General Retailers vs Financial Sector (Monthly Chart): Price chart sees General Retailers starting to again under-perform Financials. https://www.tradingview.com/x/0KBtOyNA/
8.  Gold v SPY (Monthly Chart): A break below 4 as per the relative chart would see the downward trend line continuing as well as the large top that has been in place since January 2006 come into play. https://www.tradingview.com/x/KNPloU1W/
9.  Mondi: From a trading perspective, I am looking at the share on both the long (buy) and short side (sell). The share is forming a falling wedge which is 75% complete. Buy at ~ 290/294. Sell at ~ 328/331 (which is at the downward trending 50-day MA).  https://www.tradingview.com/x/Q93hPawf/
10.  Shoprite (SHP): Briefly, I would like to illustrate the share from both a technical long term equity portfolio perspective as well as a short term technical trading perspective.

 

Monthly Chart: In August 2004, we saw the RSI start to trade above the 70 level. While a print above 70 is typically considered overbought, SHP’s share price continued to trend strongly, moving from 1040 in August 2004 to 4440 by December 2007. Now we are seeing the RSI trend toward ‘oversold’ territory with the lowest reading since 2002. Just as we saw the price remain strong when the RSI traded in overbought territory we may continue to see weakness, as the RSI trades in oversold territory.

 

Daily Chart: In the short term, and particularly for traders, the share price can remain volatility however still provide opportunities to participate on both the long and short side. The daily chart sees the price breaching the incline support going back to 25 March. As mentioned on previous occasions breakdowns are often accompanied by pullbacks (sometimes sharp). Here I am provisionally looking at a test of roughly sub-16570c as a rebounded play back to 17200c. Stop-loss: 162.30.       

Monthly Chart: https://www.tradingview.com/x/NSU5VTlC/

 

Daily Chart: https://www.tradingview.com/x/AVtSdMJm/

11.  Richemont is a share that has managed to play out according the’ technical textbook’.

 

– Back in August 2018, the R130 level was were we saw a short/sell opportunity (link here: http://tiny.cc/c0jx6y ). From there we saw the price test a low of R88 by November.

– Then in December a buy/long was looming, with R90.69 as the entry level identified. (link here: http://tiny.cc/x4jx6y )

 

Last week we saw the price rally on the back of it’s results as well as assisted by a weaker Rand.

 

At current levels, the technical setup suggests that there could be some short term consolidation before the next leg higher with the price potentially forming a ‘bull flag’. For medium term equity portfolio traders, a break above the downward trend line would strengthen the case for a move to 125 while a move back below R100 is a good opportunity to accumulate the share.

 

For CFD traders, the resistance level at R113/115 is a level to watch for a move back to R105 (short/sell).

https://www.tradingview.com/x/uEGGladO/
12.  TFG (The Foschini Group): Keep your eye on 174/172 as a short term accumulation/rebound zone.  https://www.tradingview.com/x/UtStv9tH/
13.  PPC: The share is breaking it’s downward trend line going back to 02-May-2018 while the RSI displays the same price action. Additionally, we are starting to see the 50-day make a small turn higher with the price above this level. Change in trend from bearish to bullish. https://www.tradingview.com/x/eFWYj4sb/
14.  PSG Group: Watch the money flow.  The last three trading days sees the wicks showing some buying around the 247 level however we could trade down to the support zone of 239/241. Small turn up on the ‘money flow index’ suggest buyers starting to become interested around current levels.   https://www.tradingview.com/x/PRB5xv13/
15.  Distell Group: New buy zone 11650/11800 (provisional level). SL: 109 TP: 130. https://www.tradingview.com/x/lYUHdHrS/
16.  Sanlam Ltd: Monthly Chart: Caution – RSI breaking down into bearish territory while price is breaching the long term upward channel.   https://invst.ly/atua5
17.  Pairs Trade Idea: Long Harmony Gold / Short African Rainbow Mineral: On Friday (17/05) we printed an inside bar while the RSI is making a bullish divergence suggesting a short term reversal.

 

Please chat to the desk if you are interested in participating in ‘Pairs’.

 

Pairs trading is a market-neutral trading strategy that matches a long position with a short position in a pair of highly correlated instruments.

 

https://www.tradingview.com/x/CM0giH6M/
18.  Pairs Trade Idea (S/T): Long Glencore / Short Sasol (PENDING) https://www.tradingview.com/x/M5qAATtj/
19.  Relative Pairs Trade Idea (L/T): Glencore trading at a 65-month low vs Kumba Iron Ore.    https://www.tradingview.com/x/G5jnvole/
20.  Relative Pairs Trade Idea (Short/Medium Term): Long Hyprop Investments / Short Growthpoint – HYP trading at a 71 month low vs Growthpoint Properties https://www.tradingview.com/x/gKKLBKtf/
21.  Total Put Call Ratio Composite: Breakout of 2008 trend line. Something to note. https://www.tradingview.com/x/OHm44OLF/
22.  Correlation: Platinum/CNYUSD -‘as it is said: currencies lead’- Platinum to $642? https://www.tradingview.com/x/WhOg2m3Q/

Correlation: Platinum/EURUSD –‘currencies lead’ https://www.tradingview.com/x/Y0SJEUQv/

 

23.  See Charts of Interest and Data Below

 

S&P500 Sentiment – Similar Setup to September 2018

Nasdaq Sentiment – Similar Setup to September 2018

Federal Reserve Rate Monitor Tool – Market pricing in a 10% probability of a rate cut

Global PMI Tracker (source: BBG)

China Money Supply (M1) vs S&P 500 SPDR ETF

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