Unum Capital Trading Desk Research: 08 July 2019

Unum Capital Trading Desk Research: 08 July 2019

Research – 08 July 2019

Lester Davids, Unum Trading Desk

 

Chart Link
1 US 10 Year Bond: Big move higher in yields on the back of Friday’s payroll data. As previously mentioned (when yields trade at 1.99%), this is potentially a bond bull trap (yields had gone from 3.12% in October to 1.99% recently). Until before the payroll data, the market had anticipated 50bps rate cut, however what it failed to remember was that the Fed had signaled that it could move in either direction. With the US labour continuing market to show strength, the market has completely ignored improvements in labour and the continued rise in inflation. In addition average hourly earnings are up 3.1%. https://invst.ly/b747i
2 US 10 Year Bond Yield – US 3 Month Bond Yield: A widely watched recession indicator, the US10-US3M is potentially developing a double bottom pattern as per it’s daily chart as Friday’s strong candle seeks to be the start of a breach of the downward trend line going back to 05-October-2018 (recall the early October downward trend?). Should we see this level being breached, it may remove recessionary fears considering we have had 6 months of poor economic data. Keep a look out for the forthcoming US economic data – it may confirm what chart projection (the double bottom) is telling us.   https://www.tradingview.com/x/NVvxBVdA/
3 US Dollar Index:

 

Monthly Chart View: https://invst.ly/b6uii

 

Weekly Chart View: https://invst.ly/b71k5

 

4 USDZAR: Following the stronger than expected US Non-Farm Payroll Data, the pair has found support and rebounded off the 16-month incline (going back to 28 February 2018). This can be seen on the pair’s weekly chart where the price finds itself above the 200-week moving average and just below the 40-week moving average. https://www.tradingview.com/x/L99SCQut/
5 Rand / Oil Price: The price continues to trade in a sideways to downward channel, having rebounded off the 61.8% Fibonacci Retracement. A breach of the upward downward trend line resistance (above approximately R840) would signify a change in trend and potential for the bull flag formation to be triggered. https://www.tradingview.com/x/k6UWikdz/
6 JSE Top 40 Future: In the ultra short term, the fundamental news-flow across equity markets is in relation to the expectations around the Federal Reserve’s next move in relation to interest rates. Prior to the stronger than expected non-farm payroll data, market participants have been anticipating a 50-bps rate cut as weaker economic data clouds the horizon. This in turn has driven developed market yields to multi-year lows, whilst at the same time inflows have been seen in higher yielding emerging currencies such as South Africa. With our index being largely influenced by multinationals, a stronger Rand capped JSE Top 40 gains and has seen the index pull back from the recent highs of 53630 to Friday’s close of 51750 (-1880 points). Following the call to shortsell around 53336, I am monitoring the 61.8% FIB near 50400 as a potential buy/long rebound zone. https://invst.ly/b71oz
7 JSE Industrials Index (J257): The index continues to make an attempt to breach the downward trend line that has been in place since November 2017, with the current level of 80000 being a key level of interest, having previously acted as support and resistance March 2015. With the downward trend line being challenged, it is possible that we could see the index repeat the price action that took place for April to June 2017 Weekly Chart. https://www.tradingview.com/x/jCUqLGTn/
8 JSE Resources Index (J210): At current levels, the index finds itself testing and retreating from an 11-year downward trend line resistance going back to the peak of May 2008.    https://www.tradingview.com/x/GGqFAqwm/
9 J257 v J210 (Relative Chart): Triple bottom formation as per the daily chart of Industrial 25 (J257) vs Resources 10 (J210). In addition, we note the persistent test of the underside of the 200-day moving average (watch for the eventual breakthrough). https://www.tradingview.com/x/ub6kjIXn/
10 Sasol: Longer term, Sasol could see further downside as the large multi-year head and shoulder formation continues to play out. In the short term however we may see bullish reversal as the Relative Strength Index (RSI) makes a bullish divergence from the new swing low – signaling the potential for a short term move higher.    

 

Since November 2018, this has been my perspective of Sasol’s monthly chart: https://invst.ly/b71h2

https://www.tradingview.com/x/gKVuwCnl/
11 Standard Bank: Re-post of chart from last week (04-July). The weekly chart sees the price having made a significant change in medium term trend, having breached the incline support that had been in place since October 2018. For those traders looking for the next buy/long level, the most ‘better’ risk-to-reward entry stands at around the R175 level which is around the 61.8% Fibonacci Retracement. Alternatively, a rebound from around current levels, may create a short/sell opportunity at the back-test of the breakdown level. https://www.tradingview.com/x/IhRYJct7/
12 Clicks: Provisionally, traders should monitoring 194-196 as an accumulation zone. This is a confluence of the breakout level, rising trend line support/incline as well as the 61.8% Fibonacci Retracement Level.    https://www.tradingview.com/x/xKMBF7ye/
13 Shoprite: Monitoring R150 as an accumulation zone however keeping an open mind we may see a scenario where the price briefly dips below this level creating a bear trap before reversing higher again. https://www.tradingview.com/x/hSBFvdaY/
14 Telkom:

 

At current levels, the share trades at it’s 61.8% Fibonacci Retracement. I do however believe that a more attractive risk-to-reward ratio presents itself in the range of 8430c down to 8270c. Daily Chart: https://www.tradingview.com/x/uBl4j25w/

 

Monthly Chart: Longer term, most likely from a buy/long equity portfolio perspective, the 61.8%, at 6724c, also represents the backtest of the March 2019 breakout level.

 

https://www.tradingview.com/x/fHwvrDBG/

 

15 Trivago N.V – Long Term Buy/Long Setup. https://www.tradingview.com/x/MGOy3mhA/
16 Booking.com – the 15-month downward trend line has been breached. I am viewing this as a positive technical development when viewed on the weekly chart. https://www.tradingview.com/x/4Ig5Y7xT/
17 iQIYI ADR – also known as the Netflix of China. The setup is positive, with a break above the downward trend line being a further trigger for the bulls. https://www.tradingview.com/x/FoodijU7/
18 Dropbox Inc – potential base breakthrough for this cloud computing stock. You may recall in March 2018 the company announced a strategic partnership with cloud giant Salesforce.com.   https://www.tradingview.com/x/QJvy4xqz/
19 Netease Inc: Should we see the price regain $274 and maintain support above this level, it should bode well for the bulls. https://www.tradingview.com/x/AfnzR5x5/
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 as well as clients and other recipients 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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