Introduction:
We have a situation right now where the resi 10 index is trying to grind ever higher, while financial and industrial stocks (findi) are forming potential topping patterns. The JSE All Share index is forming a ‘potential’ topping pattern in the short-term (head and shoulders) and (more of) a short-term correction is very possible. We show the important levels to minor for any new breakdown there. The S&P 500 is also forming a similar potential head and shoulders top in the short-term.
Right now however gold shares are looking interesting again. We’re getting the JSE gold index rallying off important support Thursday, and a stock like Anggold is trying to give an upside breakout right now. These stocks have sold off for some weeks so there is upside potential there.
The JSE industrial 25 index (indi 25) is also forming a potential head and shoulders. And on the commodity front, crude oil is nearing an important upside target and is overbought. A correction is likely there soon. The stock charts looked at are: Aspen(upside breakout potential), SABMiller (very oversold, with bullish signs), and Anglogold (trying to break out today).
Overall, while I've been looking for a correction in the market, the market is still holding up relatively well, despite selling off sharply towards the end of last week and early this week. Some critical short-term support levels are shown herein. For now we are still holding above them; if we don't break down soon, the market will go higher. So overall we are at an important juncture right now.
Executive Summary:
All Share Inx (chart 1): Hold short with a stop as a close above line 3.
Aspen (chart 2): Buy a close above line 3, or intraday break above R331.50 – whichever happens first
SABMiller (chart 3): Buy a close above line 1 (R893.50). But sell short if it closes below line 3
Anggold (chart 4): Buy on a close above line 2.
Shortable stocks/instruments: 0
NB NOTE: The JSE ALL SHARE INDEX is a measure of the broader market and isn’t a tradeable instrument. However, one can trade the JSE Top 40 index future through the GT247.com platforms
UPDATE OF LAST WEEKS THREE STOCK CHARTS:
Anglo: it gave the reversal day/candle down last Thurs. to sell short on. It’s dropped for a few days but is rallying on Thursday. This rally might be forming the right shoulder of a potential H/Sh. For now keep holding short, but with caution. The neckline if it is a H/Sh is 138.50. A close below there will setup a drop to 114. For now place your stop as a close above 161. If it closes below 138.50, lower the stop to above the right shoulders i.e. the current bounce. From 120 lower the stop to a breaking of its prior two day high, then prior one day high from 116. Bigger picture I see it going a lot higher as mentioned last week.
Assore: last Weds it had a very strong close which means it was almost at its upside target, making buying then not worth the while (from a risk/reward perspective). It’s pulled back for a few days and is moving up again. Aggressive traders only, can attempt a short-term buy at current levels, for a move to 222.00. Stop is a breaking of its prior two day low. Then one day low from 216.
Shoprit: it’s still in its sideways pattern, either a H/Sh or H/Sh continuation pattern forming. It’s rallying sharply Thursday. Continue to monitor the levels given last week i.e. a close below 164.70 will be a short signal, and a close above 175.70 a long signal. Target for the upside break is 183 for half profits then 190. For a breakdown the target will be 148. Right now the upside breakout is looking more likely.
SHORTABLE (DOWN-TRENDING):
Please note:
- We list the stocks, and indices (local and overseas) that are in well-established downtrends and that can be sold short (see Glossary for definition), on rallies to resistance.
- Selling short can be done via single stock futures, CFDs, spread trading, and/or put warrants.
- One way of trading these stocks/indices is to sell short rallies to the falling 30-day moving average. The moving average tends to act as loose resistance. Wait for a downward reversal at the moving averages before selling short.
- NOTE 1: ALWAYS USE PROTECTIVE STOPS ON ALL POSITIONS. Selling short is for short-term traders only, and all positions must be monitored closely.
- NOTE 2: The instruments on this list are not automatic shorts, but it is a starting point for looking. Always look at the chart first before making a final decision.
Down-trending Stocks: 30-Day MA:
None
Int’l Instruments: 30-Day MA:
None
OVERALL SUMMARY
We have the JSE All Share index and S&P 500 forming “potential” head and shoulder tops right now. The necklines there need to be monitored closely. If closed below, we’ll get more short-term selling off. But the longer we hold above short-term support levels, the more likely the market is to head still higher. It appears though that if we do get a decent correction over the next week or so, we will lead higher again thereafter. This means that stock markets may not be quite ready to come down in earnest again just yet. However, I am still expecting the big sell-off, but more than likely in the third quarter.
Overall, trading conditions remain difficult right now. Give your trades little room to move against you, and start locking in profits fairly quickly.
The one area that looks to be setting up for a good rally though is gold stocks. These stocks have pulled back to oversold levels and are showing good strength Thursday. That is a sector to be looking at right now.
PS: Remember: Protective stops on all positions!
NEXT COURSE DATES:
JOHANNESBURG:
Course 1: Technical Analysis - 29th May 2016 (Sunday)
Course 2: Advanced Technical Analysis and Money Management - 12th June 2016 (Sunday)
Course 3: Developing Trader Discipline (Trading Psychology) - 10th June 2016 (Friday)