Quite excited to report that this blog is being migrated to our new website which should be up and running within the next week.
www.underdoginvestments.co.za
Tuesday, March 15, 2016
Monday, March 14, 2016
Underdog Perspectives: 14 March 2016
14 March 2016
We can see an interesting weekly candle painting off last week's trading action as the stochastic continued to move firmly upward towards the overbought zone (albeit not there yet). The candle in question has a relatively long tail and wick, reflecting a degree of indecisiveness as the bulls and bears struggled to take control. As a follow on to the previous week's strength, it was perhaps not unexpected and we included some commentary around envisaged consolidation in our post at the beginning of last week. The question now is whether the uptrend will resume or whether the bears will try to use this as an opportunity to start forcing a reversal of the past few weeks' worth of market strength.
To try and answer this we now drill down into the daily charts we can see the stochastic continuing its downward move from overbought conditions. Against this, Friday's candle was certainly more bullish than would be expected in a clear-cut retracement or reversal but again we see the relatively long wick and tail in almost a fractal imitation of the weekly candle. In fact with a couple of days of long wick candles being painted at the tail-end of last week, it could be seen as the bears really losing some momentum on their retracement journey with the bulls pushing back hard over the past 2 trading sessions.
Where we appear to find ourselves then is in a trading zone between about the 45,000 and 46,300 levels and our expectation is for continued volatility within that zone with a break above the red resistance zone or a break below the blue support zone being needed to provide some clues as to the next direction this market takes. Given the size of this trading zone, it could be a good opportunity for intraday trades to yield some positive outcomes.
On the portfolio front, no changes were made on Friday and with 2.3% downside risk in play at a 2.77 reward-risk target, we're fairly comfortably positioned. We do have an eye on a potential GRT trade though with watchlist stocks for the day being ZED and AIP.
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We can see an interesting weekly candle painting off last week's trading action as the stochastic continued to move firmly upward towards the overbought zone (albeit not there yet). The candle in question has a relatively long tail and wick, reflecting a degree of indecisiveness as the bulls and bears struggled to take control. As a follow on to the previous week's strength, it was perhaps not unexpected and we included some commentary around envisaged consolidation in our post at the beginning of last week. The question now is whether the uptrend will resume or whether the bears will try to use this as an opportunity to start forcing a reversal of the past few weeks' worth of market strength.
To try and answer this we now drill down into the daily charts we can see the stochastic continuing its downward move from overbought conditions. Against this, Friday's candle was certainly more bullish than would be expected in a clear-cut retracement or reversal but again we see the relatively long wick and tail in almost a fractal imitation of the weekly candle. In fact with a couple of days of long wick candles being painted at the tail-end of last week, it could be seen as the bears really losing some momentum on their retracement journey with the bulls pushing back hard over the past 2 trading sessions.
Where we appear to find ourselves then is in a trading zone between about the 45,000 and 46,300 levels and our expectation is for continued volatility within that zone with a break above the red resistance zone or a break below the blue support zone being needed to provide some clues as to the next direction this market takes. Given the size of this trading zone, it could be a good opportunity for intraday trades to yield some positive outcomes.
On the portfolio front, no changes were made on Friday and with 2.3% downside risk in play at a 2.77 reward-risk target, we're fairly comfortably positioned. We do have an eye on a potential GRT trade though with watchlist stocks for the day being ZED and AIP.
To try and answer this we now drill down into the daily charts we can see the stochastic continuing its downward move from overbought conditions. Against this, Friday's candle was certainly more bullish than would be expected in a clear-cut retracement or reversal but again we see the relatively long wick and tail in almost a fractal imitation of the weekly candle. In fact with a couple of days of long wick candles being painted at the tail-end of last week, it could be seen as the bears really losing some momentum on their retracement journey with the bulls pushing back hard over the past 2 trading sessions.
Where we appear to find ourselves then is in a trading zone between about the 45,000 and 46,300 levels and our expectation is for continued volatility within that zone with a break above the red resistance zone or a break below the blue support zone being needed to provide some clues as to the next direction this market takes. Given the size of this trading zone, it could be a good opportunity for intraday trades to yield some positive outcomes.
On the portfolio front, no changes were made on Friday and with 2.3% downside risk in play at a 2.77 reward-risk target, we're fairly comfortably positioned. We do have an eye on a potential GRT trade though with watchlist stocks for the day being ZED and AIP.
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Sunday, March 6, 2016
Underdog Perspectives: 07 - 11 March 2016
11 March 2016
Choppy day yesterday culminating in almost a spinning top type candle as the buyers and seller struggled for ascendancy over the course of the day and into the ECB press conference. With the stochastic still looking quite bearish and now starting to break to the downside, one would expect further selling pressure. But as noted yesterday, unless the bears can push this down to a break and close below below 45,000 , this is still viewed as a bullish retracement. And if yesterday's closing action was anything to go by, the bulls are eager to continue the journey north. With no major data outputs coming out internationally today, its looking like a straight continued response to the European stimulus announcement yesterday so we could be in for another choppy day defined by the 45,000 and 46,700 levels with the breaks of yesterday's high and low levels being key to the start of proceedings.
Two new positions were added into the portfolio yesterday. A BVT long and an SUI short. Both trades are entered on a similar basis as can be seen from the charts. The entry level on BVT was 344.57 with a 365 target and a stop around 334.
On SUI the entry was at 73.61 with a 65.50 target and a stop around 77.70.
Not looking to add to positions today unless some targets are met.
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Choppy day yesterday culminating in almost a spinning top type candle as the buyers and seller struggled for ascendancy over the course of the day and into the ECB press conference. With the stochastic still looking quite bearish and now starting to break to the downside, one would expect further selling pressure. But as noted yesterday, unless the bears can push this down to a break and close below below 45,000 , this is still viewed as a bullish retracement. And if yesterday's closing action was anything to go by, the bulls are eager to continue the journey north. With no major data outputs coming out internationally today, its looking like a straight continued response to the European stimulus announcement yesterday so we could be in for another choppy day defined by the 45,000 and 46,700 levels with the breaks of yesterday's high and low levels being key to the start of proceedings.
Two new positions were added into the portfolio yesterday. A BVT long and an SUI short. Both trades are entered on a similar basis as can be seen from the charts. The entry level on BVT was 344.57 with a 365 target and a stop around 334.
Not looking to add to positions today unless some targets are met.
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10 March 2016
The reversal/retracement continued yesterday with another solid red candle being painted. The stochastic remains overbought but has now crossed below its signal line. The 21/89 bullish crossover has however taken place with this positive relationship having last been on the charts at the beginning of December 2015. Price has now retraced to the 23.6% level but with downward momentum still in place, one could continue to look to the 45,000 level and the 38.2% retracement zone. A close below 45,266 would also be significant as it would represent a daily 3-line break.
We closed out the balance of our HAR long position yesterday on some intraday weakness which violated the trailing stop level. While profits were fairly modest, the stock had been felling a bit sluggish and with PAN still in the portfolio mix - albeit fairly flat to date, we're still comfortable with the level of our gold exposure at the moment.
Our NPK short trade opened yesterday moved slowly but steadily out of the block and we entered a new -although very small due to a lack of fill- short position on RMH as set out below:
We'd noted that the stochastic had moved overbought and although he 21/89 was in danger of rolling over to the upside, following the huge reversal On Tuesday, we identified an opportunity to get short with a view to a move down to the most recent lows. We managed an intraday entry at 59.02 (although only filling 20% of our target position) before the market fell away to close well on it sway to target.
With some decent momentum behind this mvoe, we'd expect this target to be met during today's trade which would open some more portoflio capacity for watchlist items which have setup - BVT and SUI. We're aso eyeballing MRP, ZED, TSO and PPC.
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The reversal/retracement continued yesterday with another solid red candle being painted. The stochastic remains overbought but has now crossed below its signal line. The 21/89 bullish crossover has however taken place with this positive relationship having last been on the charts at the beginning of December 2015. Price has now retraced to the 23.6% level but with downward momentum still in place, one could continue to look to the 45,000 level and the 38.2% retracement zone. A close below 45,266 would also be significant as it would represent a daily 3-line break.
We closed out the balance of our HAR long position yesterday on some intraday weakness which violated the trailing stop level. While profits were fairly modest, the stock had been felling a bit sluggish and with PAN still in the portfolio mix - albeit fairly flat to date, we're still comfortable with the level of our gold exposure at the moment.
Our NPK short trade opened yesterday moved slowly but steadily out of the block and we entered a new -although very small due to a lack of fill- short position on RMH as set out below:
We'd noted that the stochastic had moved overbought and although he 21/89 was in danger of rolling over to the upside, following the huge reversal On Tuesday, we identified an opportunity to get short with a view to a move down to the most recent lows. We managed an intraday entry at 59.02 (although only filling 20% of our target position) before the market fell away to close well on it sway to target.
With some decent momentum behind this mvoe, we'd expect this target to be met during today's trade which would open some more portoflio capacity for watchlist items which have setup - BVT and SUI. We're aso eyeballing MRP, ZED, TSO and PPC.
We closed out the balance of our HAR long position yesterday on some intraday weakness which violated the trailing stop level. While profits were fairly modest, the stock had been felling a bit sluggish and with PAN still in the portfolio mix - albeit fairly flat to date, we're still comfortable with the level of our gold exposure at the moment.
Our NPK short trade opened yesterday moved slowly but steadily out of the block and we entered a new -although very small due to a lack of fill- short position on RMH as set out below:
We'd noted that the stochastic had moved overbought and although he 21/89 was in danger of rolling over to the upside, following the huge reversal On Tuesday, we identified an opportunity to get short with a view to a move down to the most recent lows. We managed an intraday entry at 59.02 (although only filling 20% of our target position) before the market fell away to close well on it sway to target.
With some decent momentum behind this mvoe, we'd expect this target to be met during today's trade which would open some more portoflio capacity for watchlist items which have setup - BVT and SUI. We're aso eyeballing MRP, ZED, TSO and PPC.
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09 March 2016
And at last we see the long-anticipated reversal candle painting as the bears finally acknowledge a resistance level. Or is it a reversal? Yesterday's trading action was relatively tight in the context of the rest of the month and even with the stochastic now crossing below its signal line from overbought territory, the T40 has moved so far above its 21/89 moving averages that its's almost inevitable we see crossover taking place in that space as we noted at the beginning of the week.
So any weakness we see coming through in the short-term needs to acknowledge recent strength which points to a higher probability of a short-term retracement versus a full on bearish reversal being the the order of the day at this juncture. Again, not a bad position for the bulls and a move back down to around support at the 45,000 level which lines closely with the 38.2% retracement level might be an area we could look to run some short setups down into.
Yesterday saw us close out our long position in SAP as it closed just below the trailing stop level. End to end it was virtually a break-even to small loss close as we'd been ratcheting the stop up over the past 2 weeks. Given a relative sluggishness in SAP's response to the recent market strength, we're not uncomfortable moving onto fresh opportunities.
We did add an NPK short into the mix to supplement the portfolio With NPK we can see the pullback its put over the past couple of weeks in a continued longer-term downtrend. With the stochastic moving overbought and starting to reverse, we looked to a entry at R19.02 intraday yesterday setting our stop level at R20.32 and aiming for a move back down to the swing low at R16.44
On today's watchlist we have RMH followed by RDF ad PPC
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And at last we see the long-anticipated reversal candle painting as the bears finally acknowledge a resistance level. Or is it a reversal? Yesterday's trading action was relatively tight in the context of the rest of the month and even with the stochastic now crossing below its signal line from overbought territory, the T40 has moved so far above its 21/89 moving averages that its's almost inevitable we see crossover taking place in that space as we noted at the beginning of the week.
Yesterday saw us close out our long position in SAP as it closed just below the trailing stop level. End to end it was virtually a break-even to small loss close as we'd been ratcheting the stop up over the past 2 weeks. Given a relative sluggishness in SAP's response to the recent market strength, we're not uncomfortable moving onto fresh opportunities.
We did add an NPK short into the mix to supplement the portfolio With NPK we can see the pullback its put over the past couple of weeks in a continued longer-term downtrend. With the stochastic moving overbought and starting to reverse, we looked to a entry at R19.02 intraday yesterday setting our stop level at R20.32 and aiming for a move back down to the swing low at R16.44
On today's watchlist we have RMH followed by RDF ad PPC
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08 March 2016
And yet another relentless push by the T40 on the back of continued resource price squeezing saw the market extend its winning form and move to a close well within the resistance zone we highlighted yesterday. The anticipated short-term consolidation has not materialised with some practical lessons in fighting against string trends being the order of yesterday's trading action.
The overbought stochastic does appear to be losing momentum though as is threatening its's signal line - if not quite yet looking ready to drop out of the overbought zone and it now becomes a case of whether the bulls can hold these levels and push through resistance towards 47,000 and higher or whether we start to see the long anticipated consolidation pullback starting to play out. Either way its going to pay to be cautious at this stage caught between the lack of oxygen in chasing a further breakout at this juncture versus fighting a string trend on the flip-side.
Meanwhile we continue to look for solid additions to the portfolio. Both the GND short and the T40 pattern short entered fell victim to the strongly rising market yesterday with stops being triggered. A lesson learnt from both f these was the importance of the final intraday trigger confirmation before making final entry decisions on a position. This was something we enacted with the entry into the PAN long yesterday:
Note how price had pulled back in the strong uptrend pushing the stochastic oversold. after setting our stop levels below the previous swing low and outside this stock's daily range, we looked for an intraday confirmation of the move back up and managed to get an entry at R2.70 yesterday. We are now aiming for a move back towards the previous swing high at R3.00 for a 2.14-1 setup.
Stocks on today's watchlist are NPK, ROC, RES, RMI and RDF. With our downside risk now at 1.9% (1.7%) and a depleted RaR at 1.19 (2.35) we will be looking to at least one of these setups for entry today.
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And yet another relentless push by the T40 on the back of continued resource price squeezing saw the market extend its winning form and move to a close well within the resistance zone we highlighted yesterday. The anticipated short-term consolidation has not materialised with some practical lessons in fighting against string trends being the order of yesterday's trading action.
07 March 2016
The upside we anticipated at the beginning of last week certainly came to fruition as can be seen by the very thick bullish weekly candle, which took the market north by some 2,300 points. This has also alleviated some of the pressure on the 21 week/89 week EMA relationship as the T40 closed above the 21 week EMA for the first time since Christmas last year. At the same time it's clear that the weekly stochastic has room for further upside potential at the moment as it crossed bullishly above its signal line.
Drilling down the daily chart we can see last week's strength manifested in a series of strong daily candles. What's interesting is that while the stochastic has moved into overbought territory, price has progressed to well above the 89 day EMA and we could see the 21 day EMA rollover bullishly in the week ahead.
The upward sloping channel and lateral resistance we highlighted last week has now been broken to the upside. However, with overhead structural resistance now expected to manifest from around the 46,400 level, and with the daily stochastic flattening in overbought territory, we may see some short-term consolidation to start the week ahead and potentially a throwback to the channel ceiling and previous lateral resistance (now support) around the 45,500 level. From a bullish perspective that would not be the worst outcome as it would give the market a chance to regroup before making an assault on overhead resistance - a break of which would necessitate some longer-term thinking in respect of market direction.
A bearish alternative would see the market punch back down and close below 45,500 level potentially opening up the door to some further downside off overbought conditions.
***
Our CFD portfolio is reflecting open downside risk of 1.7xR (1.6xR) with RaR at 2.35 (3.55). We have a long position on PAN as a potential entry for tomorrow with an NPK short and a RDF long also on the watchlist*. *One of the learnings which has manifested over the past few weeks has been the importance of refining entry triggers and levels to below the daily time-frame as these allow for superior confirmations and also provide the opportunity for getting into positions in a more timely fashion. This may change our journalling format slightly in that there will be more shorter-term decision-making which would only be commented on retrospectively but importantly our systematic approach to trade setups remains unchanged.
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