Research | Analysis & Trading Opportunities | 08 – 12 June 2020
Thank you for taking the time to read this report.
My intention with this chart pack, which includes a mix of perspectives and ideas, is to provide traders and investors at all levels with the following:
- Information: To inform and alert you to high probability technical trading setups which could assist you in generating a profit in the financial markets.
- Identification: Identify Key Levels and Insights (for e.g. Relative Sector Analysis) for your existing universe.
- Spark Additional Ideas. For e.g. Sappi and Mondi may both be attractive however you may prefer one over the other or an international stock in the same sector.
- De-Risk: Our charts may include caution around selected stocks that present downside technical risk, helping you to identify an opportunity to exit a share and preserve capital in the process.
- Provide an alternative, non-traditional and process-driven view.
The recent run-up of SA (and global) equities provided a massive number of opportunities for short and medium term traders to profit from – provided you had positioned yourself for the potential moves. With the markets having ramped up significantly in recent weeks, the most common question I’ve received is: “Any Longs? After a massive run run-up, this question comes as no surprise to me, as traders who may have missed the jump in equity prices often feel the need to chase (sometimes there’s nothing wrong with that provided the R/R makes sense) although the subsequent pullbacks may see traders select entry points with unfavorable risk-to-reward ratios. With prices having advanced sharply, it gets harder and harder for me to recommend buys/longs as I’m a firm believer that nothing moves up or down in a straight line and if you enter at current level, you may see a short term pullback. Basically, in the ‘ultra short term‘, returns are going to be hard to come by (I can guarantee you that).
Before we get into potential new opportunities, let’s recap some of the recent ideas. Did I get all of my calls correct? No! (you’ll see CFR went higher so I’m wrong in the short term and I’ve been on the wrong side of DXY recently). Did I manage to catch all of the moves? No! Did I manage to alert the recipients of my research about a decent amount of money-making opportunities? Yes. Check out some of the moves clients have caught recently below (all alerts are published in real time on the Unum Capital client chat platform as well as on the research portal):
Global Safe Haven Index (SHIX)
Massive pullback at the monthly resistance zone has coincided with the run-up in equities. Just a reminder on what the G-SHIX is: It’s a custom, self-designed index comprising of various instruments providing an holistic view on global risk sentiment: The components are as follows:
- Gold Futures
- TLT ETF (Bonds)
- Japanese Currency Index
- Swiss Currency Index
- S&P Low Volatilty ETF
- iShares Emerging Markets ETF (Inverse)
- USDKRW ( US Dollar / Korean Won) – Trade War Component
- Copper Futures (Inverse) – Global Growth & Trade War Component
Japanese Yen Currency Index | Monthly Chart sees break lower breaking the trend line support going back to May 2015. This chart signals weakness for the Japanese Yen.
Distell Group DGH | The share has lagged the market, time for a push higher? – This idea was posted in real-time on our client chat group. https://online.unum.co.za/trade-idea/distell-group-dgh-technical-trade-idea
BID Corp | On 26 May we flagged the potential breakout which saw the price advance from the recent high of 23571c to the recent high of 27775c. Re-enter long on a back-test of 24500c and 24200c.
RBS plc – A strong base breakout has seen the price clear R2 and R3. RSI very strong and MACD starting to cross the zero bound while volume is starting to spike.
Lloyds Banking Group
Key Technical Drivers:
- Strong volume candle structure
- Elevated volume
- 8 and 21-EMA bull cross and trending up
- MACD cross
Currently at 137 – higher targets probable: 144 and 156. Stop: 124
Swatch Group | Bull flag breakout | This setup only recently caught my attention (I missed the initial channel break). Thus far we’ve moved through and closed above R2. The MACD is a currently crossing above zero and the RSI is at a bullish 64 reading.
Kraft Heinz | Weekly Chart | For the first time in three years, the share has made a strong close above it’s 40-week moving average (i.e. 200-day moving average). A weekly close above $34.30 – the 16-month resistance level opens the share for further upside. Adding to the bullish structure is the RSI which prints a 3 1/2 year high.
Copper | The YTD deteriorating global economic backdrop has put pressure on risk assets including industrial commodity Copper. Also adding pressure has been the expectation of lower Chinese economic growth which is a key driver of the commodity. While the short term pressures may return following the recent run-up, a review of the monthly chart reflects a similar technical structure as was the case for the period for August 1988 to January 2002 where we saw: (1) a price surge (marked in yellow on chart) – October 1993 to January 1995 / December 2008 to March 2011. (2) Consolation from February 1995 to February 1999. (3) A double bottom developed in March 1999 and October 2001 (green rectangle markers on chart). The period for 2001 to 2003 saw this consolidation continue however also saw a breach of the multi-year downward trend line going back to the 1995 peak. While questions remain over the global economic outlook, the question from a long term technical perspective is: are we at a similar juncture to the 2001-2003 period where further consolidation while be seen before move higher? (Yip, I see the December 2003 breakaway gap that has the potential to be filled over the longer term).
Copper vs Gold Update | We recently flagged this setup in a client research note dated 5 May. Bear flag complete and downward trend line breached – signaling out-performance of Copper vs Gold.
Copper vs Platinum Ratio | Copper breaking the short term downward trend versus platinum. Price crossing 8-21-50 EMA with a strong candle structure.
Pair: Anglo American vs Anglo Platinum | Relative Chart has seen price clear the 8 and 21 EMA with subsequent clearance of the 50-EMA. Prior to this we saw the recent downward trend line being breached. R1 and R2 being targeted as the trend turns from neutral to bullish. Please also bear in mind we could see a pull back (re-test) from the break before the ‘official’ trend change comes into play.
Relative Sector Analysis
Resources 10 vs Financial 15 | During February, we identified the potential out-performance of JSE Resources vs JSE Financials. This was based off the long term (monthly) chart that showed an upward trend which was starting to accelerate. Subsequently, Resources rallied while Financials declined. Upon a fresh review of the monthly chart, we note the price finding resistance at the prior support as well as the 0.618% Fibonacci Retracement Level while the month-to-date candle printing a bearish engulfing. Zooming into the daily chart, we also note the relative price has broken below it’s 8 and 21 day exponential moving average. In addition, we also note the MACD above zero, but in a negative trend while the RSI is trending lower with a 41 (bear zone print).
Sibanye Stillwater SSW | After recently being rejected at the year-to-date supply zone, the share has developed a bear flag formation which suggests the potential for further downside. The structure is similar to that which was seen at the beginning of March 2020 (bear flag) where we initially saw a sharp ‘pop’ higher followed by the technical pattern playing out. At the last close, the 4H chart shows the price below the 8 and 21 exponential moving average (EMA) with a large reversal candle. A break below the bear flag as well as the 8 21 EMA cross would trigger further downside potential.
Rand / Gold Price – Update | We have continued to see the price move lower since the last flag of the bear 8 and 21 -EMA cross. At current levels the price remains in a downward trend with the RSI suggesting continued weakness (trending down and a reading of 30) while the MACD has crossed negative.
Rand / Platinum Price | Following a consolidation top, we are starting to see the price break lower with the 8/21-EMA coming into effect and the R13,777 support level being breached. RSI moving lower (now at a 40 reading – bear zone) and MACD is looking to make a bearish cross. S1 and the 200-day is also being breached.
Netcare NTC | Price breaking to upside of consolidation channel with the first pivot of 1446c is being cleared while a break of the second pivot (1495c) opens up higher levels (R1: 1558c) and (R2: 1627c). RSI is above bull line while the MACD is starting to turn up.
Dis-chem Pharmacies | We flagged the ‘inside bar’ on this share recently and the price has subsequently advanced with Friday’s candle close being a ‘Maribozu White’ – a candle type which is considered very bullish.
Clicks breaking lower vs Shoprite | The YTD top looking to be broken. 8 21 50 cross all being lost. Keep your eye in this chart for a change of trend.
JSE Small and Mid Cap vs Large Cap | Looks familiar | Relative chart sees price finding support at the June/July 2008 lows, which is where we saw a massive bullish reversal (i.e. blended small and mid-caps outperforming large caps).
Please be advised that prices are at the close of trade on Friday 05-June and that market sentiment is subject to change based global news-flow. The best option (especially for short term trading) is to capitalize on opportunities on real-time as news-flow and price action develops. Additional research/levels to follow as and opportunities highlighted when the risk-to-reward is favorable.
All the best for the week ahead.
Trading Desk Analyst
Unum Capital (Pty) Ltd
An Authorised Financial Services Provider (FSP 564)