19 February 2016
After attempting to maintain upwards momentum towards the 45,350 level, the bulls were exhausted on an intraday basis and selling into the afternoon forced the T40 down to a close below the 44,500 support level. This is significant from a number of perspectives:
- We're starting to see a stochastic reversal from overbought territory
- Should yesterday's high water mark be indicative of a swing high there is some negative divergence being displayed with the stochastic making a lower high and price making a higher high
- The daily candle is in the sell zone between the moving averages and with a long wick to the top and a close near the day's low, this appears to be a reversal candle.
- The market effectively stalled and appears to be reversing off a key fibonacci level
Putting all of this together along with our comment yesterday that the 45,350 was key for an end of week close (which now appears remote), would suggest that the 'jet fuel' has been - at least temporarily exhausted and that we could see some downside being on the cards here.
In fact, the T40 is displaying some key characteristics for a portfolio short position, so we entered one last night as marked up on the charts and off the back of the rationale set out above. Entry was at 44,333 with a stop in as a close above 46,701 and downside targets at 41,247 and then 39,800. This is clearly not an overnight trade but we will monitor and manage it as we do all our portfolio positions. Our target reward-risk is 1.8-1.
Tactically, on an intraday basis we will look tot he short side for the most part. Any long trades would be completely counter-trend and treated as such.
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Intraday saw us net a 0.6xR loss but we do have 2 overnight short positions in place which we'll monitor and look to take profit on during the course of the day.
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Quite a few changes played out on the portfolio front. The trailing stop on our GND short position was triggered intraday for a 1.5xR profit. This was however offset by and end of day close out on our IPL short which also triggered its stop loss level resulting in a 1.5xR loss. At the moment, our RMH position is also looking vulnerable and unless it can share in anticipated market weakness today, we may see that closing out as well.Finally, we entered the new T40 short as set out above. The impact of all of these along with the normal stop tightening trade management processes has been to reduce open downside exposure to 1.5% (2.6%) at a healthy 4.5-1 potential reward-risk level. Our RaR has also reduced to 2.3 (4.1). It is tempting, given the portfolio positioning to add via some setups which have landed on the table but as noted yesterday, we're still in the process of bringing some management changes into play so again we'll just continue to manage our positions. No rush!
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- We're starting to see a stochastic reversal from overbought territory
- Should yesterday's high water mark be indicative of a swing high there is some negative divergence being displayed with the stochastic making a lower high and price making a higher high
- The daily candle is in the sell zone between the moving averages and with a long wick to the top and a close near the day's low, this appears to be a reversal candle.
- The market effectively stalled and appears to be reversing off a key fibonacci level
Putting all of this together along with our comment yesterday that the 45,350 was key for an end of week close (which now appears remote), would suggest that the 'jet fuel' has been - at least temporarily exhausted and that we could see some downside being on the cards here.
In fact, the T40 is displaying some key characteristics for a portfolio short position, so we entered one last night as marked up on the charts and off the back of the rationale set out above. Entry was at 44,333 with a stop in as a close above 46,701 and downside targets at 41,247 and then 39,800. This is clearly not an overnight trade but we will monitor and manage it as we do all our portfolio positions. Our target reward-risk is 1.8-1.
Tactically, on an intraday basis we will look tot he short side for the most part. Any long trades would be completely counter-trend and treated as such.
***********
Intraday saw us net a 0.6xR loss but we do have 2 overnight short positions in place which we'll monitor and look to take profit on during the course of the day.
***********
Quite a few changes played out on the portfolio front. The trailing stop on our GND short position was triggered intraday for a 1.5xR profit. This was however offset by and end of day close out on our IPL short which also triggered its stop loss level resulting in a 1.5xR loss. At the moment, our RMH position is also looking vulnerable and unless it can share in anticipated market weakness today, we may see that closing out as well.Finally, we entered the new T40 short as set out above. The impact of all of these along with the normal stop tightening trade management processes has been to reduce open downside exposure to 1.5% (2.6%) at a healthy 4.5-1 potential reward-risk level. Our RaR has also reduced to 2.3 (4.1). It is tempting, given the portfolio positioning to add via some setups which have landed on the table but as noted yesterday, we're still in the process of bringing some management changes into play so again we'll just continue to manage our positions. No rush!*****************************************************************************************************
18 February 2016
Yet another bullish day on the markets with the T40 now up 6.5% in 4 days. The index also managed to regain the key 44,500 support level. But with the stochastic now in overbought territory - although still very firmly bullish - and the T40 closing virtually on a dime at the 61.8% retracement level of the high low for the year-to-date, it's going to be key for the bulls to maintain momentum.
To this end we could now start eye-balling the 45,350 level as a weekly close above that level would constitute a positive 3LB on the weekly chart, negating (at least for the moment), the 5 month downward trend we've been highlighting using 3LB charts. But with 750 points of headroom, in overbought conditions and a continued negative EMA21/89 condition, this could be a tall ask for the bulls...
From a tactical perspective, we'd be comfortable riding momentum up to the 45,350 level but any short-side breaking - especially below 44,500 would be an opportunity to catch a piece of any downward move.
To this end we could now start eye-balling the 45,350 level as a weekly close above that level would constitute a positive 3LB on the weekly chart, negating (at least for the moment), the 5 month downward trend we've been highlighting using 3LB charts. But with 750 points of headroom, in overbought conditions and a continued negative EMA21/89 condition, this could be a tall ask for the bulls...
From a tactical perspective, we'd be comfortable riding momentum up to the 45,350 level but any short-side breaking - especially below 44,500 would be an opportunity to catch a piece of any downward move.
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Intraday was again a muted affair with a net 1xR loss on all positions. With the big moves over the past few days, it's almost a relief not to have overnight positions running in the market at the moment.
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Portfolio trading saw us close out our INL short position for a 2.3xR loss with another close above the stop. Thee's an argument to be made in post-trade analysis and based on some development work that the stops on these 3LB end of day trades are too tight (we currently position them on the opposing end of our trigger candles as opposed to the setup candles) so that may be a minor amendment we look to bring online shortly.
We also managed a solid entry into the RMH position highlighted late yesterday, coming in at R57.91. For the balance, we have tightened a number of existing position stops as well with the result that our open downside risk has remained fairly flat at 2.6% (2.4%) but our potential reward-risk has shot up to 5.2xR. Our RaR has also benefited from these changes moving up to a substantial 4.1 level. For now we're standing pat on our positioning as we've brought some money-management criteria into play which caps overall CFD gross long-short portfolio exposures at a lower level but we are fairly comfortable with how we are currently exposed. The focus is now on maintaining better consistency - especially on our RaR levels as the portfolio turns over.
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Portfolio trading saw us close out our INL short position for a 2.3xR loss with another close above the stop. Thee's an argument to be made in post-trade analysis and based on some development work that the stops on these 3LB end of day trades are too tight (we currently position them on the opposing end of our trigger candles as opposed to the setup candles) so that may be a minor amendment we look to bring online shortly.
We also managed a solid entry into the RMH position highlighted late yesterday, coming in at R57.91. For the balance, we have tightened a number of existing position stops as well with the result that our open downside risk has remained fairly flat at 2.6% (2.4%) but our potential reward-risk has shot up to 5.2xR. Our RaR has also benefited from these changes moving up to a substantial 4.1 level. For now we're standing pat on our positioning as we've brought some money-management criteria into play which caps overall CFD gross long-short portfolio exposures at a lower level but we are fairly comfortable with how we are currently exposed. The focus is now on maintaining better consistency - especially on our RaR levels as the portfolio turns over.
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17 February 2016
Some abbreviated posting today on the back of some illness. On an end of day basis, yesterday saw the 44,500 resistance level broken and then the sellers managed to push the price back down with a close back beneath this level. Even though the stochastic is still heading upwards, we have what looks like a daily long-wicked reversal candle in place and a follow through from this could see a move back down to the 43,400 support level. Also if the stochastic stalls here, we could see some negative divergence being exhibited on a daily basis. The bulls would need to take out yesterday's high water mark to negate this.
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Intraday was a fairly flat situation with a 50% win-rate on 2 trades closed out and a break-even result. We do have 1 overnight short position which we continue to monitor though.
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Similarly on the portfolio front there've been no changes. We decided to continue to hold INL as it ended weaker into the close. Today will be critical for this share to see if it can resume its move back down. Open downside exposure is now at 2.4% with a target reward-risk of 3.67-1.
**LATE update**
Looking at the analysis of RMH, we can see how the its moved into overbought territory with the major downtrend still remaining in place. Yesterday saw a bearish candle being painted allowing for an opportunity to get short at current levels and potentially look to target the R49.00 and R46.00 level again. With the stop in above R60.10 this is a decent target reward-risk of 4.5-1
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Similarly on the portfolio front there've been no changes. We decided to continue to hold INL as it ended weaker into the close. Today will be critical for this share to see if it can resume its move back down. Open downside exposure is now at 2.4% with a target reward-risk of 3.67-1.
**LATE update**
16 February 2016
Another solid bullish candle saw the T40 break through 43,400 and move all the way up to the higher resistance levels noted yesterday. The stochastic still appears quite bullish with room to spare before it would be regarded as being overbought.
With momentum still in place, tomorrow will see whether the bulls can follow through and start pushing the T40 to a break through the descending and lateral resistance levels - in which case, the next structural resistance level would come in at around the 45,300 level. Alternatively a failure on this break could see some consolidation with a potential move back down towards 43,400. Worth noting that the daily candle ranges for February have to date exceeded an average of 1,000 points for the month to date and large daily moves have become the order of things to date making early session setups quite a profitable prospect.
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On that note, we've not really caught much of these moves over the past few days with our setups. Today saw us nett a 1xR loss for our efforts. Not by any means damaging but it can be frustrating to watch opportunities go amiss. Important in these situations to maintain focus and discipline - new chances will come!
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On the portfolio front, we have struggled a bit more with another short closeout on DTC coming through today (4 days/2.1xR loss) and potentially a closeout on our INL position being on the cards for tomorrow. Consequently, our open downside risk is now at 2.1% and despite the potential reward-risk of 4-1, our RaR has deteriorated greatly to a very modest 0.3 -1. With no long position setups being presented to complement the SAP long we flagged yesterday and managed to enter today, we did manage to find a short setup in a stock which appears of late to be displaying a relatively low level of correlation to the balance of our open positions.
The COH short noted has a target entry at R40.22 or better with a stop in as a close above R42.50 and downside targets at R37.10 and R34.20 yielding a target reward-risk of 2-1.
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15 February 2016
A solid bearish move over the course of the week despite a late week rally on Friday. Last week we highlighted the bearish channel in which the T40 was moving and the market broke out of the bottom of this formation quite convincingly moving all the way down towards the major support zone between 41,5000 and 42,000 before finding a substantial bounce on Friday, again moving to test the 43,400 resistance level.Looking at the week ahead, there are a few elements to keep an eye on. The weekly chart shows a fairly neutral stochastic with the potential for forming a fairly low higher high top if the bulls cannot push convincingly forward on a weekly basis. So if last week's high cannot be challenged on the T40, we could see the makings of some weekly negative divergence in the making (price would be making a lower high). Also worth noting - as we've noted in the past - is the fact that the 21 week EMA is getting very close to crossing the 89 week EMA - the last bearish crossover like this was seen in September 2008. On the flip-side, we need to remember - as highlighted in the start of the month post - that the T40 has tended to rally into month-ends over the past few months.
On the daily chart, we can see now how the stochastic is coming off oversold conditions and is threatening to start moving upwards fairly sharply. This is mainly on the back of a very bullish daily candle painted on Friday. However, we're once again in the overhead resistance zone between 43,000 and 43,400 and the bulls will need to push ahead off Friday's momentum to break through here and try and make in roads on the higher placed lateral and descending resistance levels. Failure to do so would start confirming the negative divergence noted on the weekly chart analysis above with downside potential back into the 41,500 - 42,000 support zone.
On balance we have the makings of yet another tricky trading week ahead. Again we would look to trade the range between 42,000 and 43,400 but on further strength we could look for potential longs on a break above the 61.8% retracement level towards 44,500 (with a wary eye on the descending resistance line)
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Following Friday's rally and a close-out of the PPC short position on Friday (a break-even exit), downside risk exposure is now at 3.3% with a target reward-risk of 2.97-1 factoring in the DTC short position which is under risk with a close above its stop level on Friday. (We would look to close this position down if it fails to start moving down on Monday.) Potential RaR has also increased to 2.36 from 1.41 so the potential for the current positioning looks solid enough. Given the high level of short-side exposure, with capacity in hand and a long setup opportunity presenting itself, this is the one we'll be looking at for tomorrow:
SAP has been one of the stronger stocks on the market and has been in a solid uptrend over the past 5 months. The daily stochastic has now moved oversold though and with the painting of a bullish candle on Friday, this presents an opportunity to get onto the longer-term trend. So we're aiming to enter at around the R67.98 with a stop in as a close below previous structure low at R63.79 and targets at R79.40 and R84.00
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