Lester Davids

Oct 217 min read

Active Trading Plan - Monday, 21 October 2024

This page is updated as the price action and news flow develops and, as opportunities are identified in real-time. Research is published DAILY and can be accessed at the following link: www.unum.capital/blog

On Friday I published research on Gold Fields, Sibanye Stillwater, Truworths, Bidvest, Tiger Brands (and more). In case you may have missed it, you can read it here: https://www.unum.capital/post/active-trading-plan-friday-18-october-2024

Unum Research Attains 3rd Place In The 2024 Securities Broker Awards.

COVERAGE: Notes Added Thus Far Today

DRD Gold [Added Intraday]
Price Action Talking Points
JSE Sector Ratings
Summary of Technical Trend Ratings
JSE Top 40 Index
Using Technical Screens To Find Opportunity
British American Tobacco (BTI)
Gold At Record Highs; GLD (New Gold Issuer) Now +69%
SBK Standard Bank (SBK)
Naspers Ltd (NPN)
Prosus N.V (PRX)
Anglogold Ashanti (ANG)
Pick n Pay (PIK)
Mr Price Group (MRP)
Thungela Resources (TGA)
South Africa 10-Year Bond Yield (ZA10Y)
Anglo American Platinum (AMS)
Old Mutual Ltd (OMU)
[Global Ideas] Netflix to New Highs
Pepkor Holdings (PPH)
Mondi Plc
Tactical Trading Guide: AGL, HAR, MRP, SHP, SSW, TFG
Most Overbought/Oversold
Strongest/Weakest Open To Close
Trading Setups (via Strategy Screens)

DRD Gold [Comment Added Monday 21 October at 13h42)

This has been a great recent setup, having consolidated above it's 21-week EMA. Now extended to the upside (in the short term).

Price Action Talking Points [Pre-Market] In terms of technical regimes, the mean reversion to a broadly neutral position across most sectors at the start of last week reflected normal price action for a market that was largely overbought in the ultra short term. That overbought condition wasn't limited to one sector, with almost all of the major/heavyweight constituents having previously traded in an overbought range (banks, retailers over the medium term as well as resources in the short term following the economic intervention by the Chinese government). Having retraced, you might have seen a several names setting up for 21-day or 50-day EMA buy re-entries, or at the 8-day EMA for shares that refused to pull back to the same extent as others. From my vantage point, it's a sector-pickers market. Sector constituents often move in tandem and are driven by macro factors such as the expectation for lower interest rates, geopolitics and, as mentioned, stimulus from the Far East. After, a short term pullback, RESOURCE shares are finding their feet. Anglo's up after BHG's top brass visited the country, which raised speculation of another offer. Naturally, this news has reignited buying activity in the sector, but with some peers performing better than others. The buying in BANKS has become less aggressive, which seems natural considering the excessively overbought conditions. This also ties into money having started flowing into resource shares. RETAILERS have been expected to benefit from the two-pot system which has been discounted across several counters, specifically the discretionary names (TFG, MRP etc.) - at current levels, these names looked to be fairly prices versus the attractive valuation on offer before the S/African national election. Staying with the retail sector, TRU might be working on a multi-year breakout above R115. This is a name I highlighted below R60 in 2023! I know that breakouts are not everyone's ideal setup but if you have a long enough time frame, then it may be worth watching. While Shoprite has long been quality, recent downgrades, has put pressure on the share. That isn't unexpected considering the above average valuation. As always, I continue to seek out opportunities for clients to take advantage of short term volatility by adopting a systematic active approaching while remaining flexible. All the best for the week ahead!

Important: Please Note The Following:

JSE Sector Ratings + Changes Over 5 Trading Sessions

Summary of Technical Trend Ratings

TECHNICAL SCREENERS: There have been some incredible opportunities to generate cash flow. One of our favorite technical screens is the price vs the 21-week EMA. For new buy/longs ideas, this strategy works well in a market that has been oversold. Here, the share is trades more than 10% below it's 21-week exponential moving average, which may offer a compelling reward-to-risk. Most recently (03 September) I published a screen with several names that matched the criteria. Over the subsequent 6 weeks, the performance has been as follows:

GFI +27% [Also flagged via the Tactical Trading Guide]

KIO +25% [Also published seperately as a trade idea]

IMP +25% [Flagged via the Tactical Trading Guide]

SSW +26% [A separate note looked for break to R14 before a rally to R20]

NPH +33% [Also a Strategy Alert at R93. Friday's high = +R124]

EXX +26% [Also published seperately as a trade idea]

ARI +19% [Also flagged as a provisional buy/long as it approached the swing lows]

MKR +11%

The original screen, as was published, is shown below:

The technical screen was originally published here on Tuesday, 03 September at 14h28: https://www.unum.capital/post/technical-screen-below-21-w-ema-by-10-or-more-tuesday-03-september-2024

This market has, and continues to provide phenomenal opportunities to generate cash flow. Well done to Unum Capital clients that have taken advantage of the opportunity to trade. To get started, contact the Unum Capital Trading Desk.

JSE Top 40 Index (J200) Are you surprised that the rising 21-day exponential moving average (EMA) and the previous breakout level acted as a support range? This isn't a coincidence. It's the level that market participants (including institutional investors/algo's) recognize as a support zone which is also likely to be a re-accumulation range. As I previously mentioned, I haven't ruled out a test of the upper boundary of the rising channel structure (denoted by the red shaded area). As at the time of typing (12h16 on Friday), this is what the model reading says:

British American Tobacco [Pre-Market] GET READY TO TRADE. A massive unwind from the note on 05 September which highlighted the unappealing reward-to-risk. Now, the share is approaching (1) it's 200-day SMA, (2) the previous breakout level and (3) the incline support extending back to the lows of April. Marked, is my provisional level, which is subject to change as the price action and news flow develops.

Gold At Record Highs; JSE:GLD (New Gold Issuer) +69%

New Gold Issuer (JSE:GLD) as highlighted to clients on Monday 07 February 2022 at 26062.

Now Trading at 44247 (+69%)

SBK Standard Bank [Pre-Market] Considering the weekly time frame, the share has not yet re-tested it's rising 21-week EMA. That is a potential short term support range and a spot for active traders to monitor. Note the model reading on Thursday evening which highlights the 21-week as a next best potential level of buying interest. I'm expecting it to fluctuate around this area and/or overshoot this level to the downside (keep an open mind/remain flexible).

NPN Naspers Pre-Market] In line with model reading i.e. look for support/accumulation on the rising 21-day EMA - strong gap up on Friday morning.

PRX Prosus [Pre-Market] In line with model reading i.e. look for support/accumulation on the rising 21-day EMA - strong gap up on Friday morning.

ANG ANGLOGOLD ASHANTI - A CASH FLOW GENERATING OPPORTUNITY THAT HAS YIELDED STRONG RESULTS. MY UPDATED COMMENT HAS BEEN ADDED TO THE ORIGINAL CHART BELOW.

PIK Pick n Pay [Pre-Market] Previously alert to an overbought condition with the view to reduce. The share has now breached it's 8 and 21-day EMA, with the price now entering the re-accumulation range which coincides with the rising 75-day EMA and 21-week EMA.

MRP Mr Price [Pre-Market] A star performer for several months which has recently started to lose price momentum. For now, holding it's 21-day EMA, but with the deteriorating candle structure, it is vulnerable to breaching this level. Resistance level 1 and 2 has been tested (and rejected) for several sessions (indicative of temporary selling pressure at this range.

TGA Thungela Resources [Pre-Market] Strong 2nd day upside reversal off the rising 21-day EMA. I discussed this setup via the Trading Setups/Strategy Screen and updated it on Friday. In case you missed it, you can read it here: https://www.unum.capital/post/active-trading-plan-friday-18-october-2024

AMS Anglo American Platinum [Pre-Market] As highlighted on Wednesday 09 October, support levels 1 and 2 were marked as a provisional next best entry i.e. an expectation for lower prices before a bullish reversal. We saw the share trade into/just above this level (S1) before staging a strong 3-day bullish reversal, reclaiming the 8 and 21-day EMA in the process.

The original Anglo Platinum Platinum chart is shown, as published to clients, is below:

South Africa 10-Year Bond Yield [Pre-Market] The bullish igniting bar saw upside follow-through while simultaneously emerging from the downward trending channel and clearing the 50-day EMA. The 50-day EMA has started to gradually turn up, with a first back-test having occurred on Friday 11 October and an upside follow-through that saw the yield trade at it's highest level (9.33%) since 16 August 2024. As mentioned in the original note which alerted to the igniting bar, higher SA bond yields have been historically negative for certain local-facing shares such as banks and property shares, hence no surprise that some of these constituents have lost some upside momentum.

Old Mutual OMU [Pre-Market] has stabilized/stopped going down. It traded into the buy re-entry range (coinciding with the 75-day EMA) and, with the candle structure reflecting some renewed buying interest. TO re-iterate, if you zoom out to the monthly chart, you'll notice the share having not participated in the rally while the recent low has been off the 8-month EMA. Fundamentally, the share remains in value territory with a 7x earnings multiple, a 6.3% dividend yield and a price-to-book of below 1x. In an historically expensive market, the valuation may attractive LT investors seeking value.

[Global Ideas] Netflix to New Highs

Pepkor Holdings [Pre-Market] The share reached my previous measured move target, which coincided with (1) overbought conditions, and (2) the previous multi-month swing highs. As with any attempt to clear resistance within an overbought range, the share has developed a false breakout and is likely to trade at more palatable/normalized technical levels. Or to put in plainly, I expect a reversion to the mean. There are however key level which active traders may want to monitor. They are as follows:

Mondi Plc [Pre-Market] There are no guarantees in markets, and there is no guarantee that this trend line will hold, but if the price action stabilizes and the aggressive downward trend slows down, then this is where market participants could consider the share for a rebound buy. NOTE: I am mindful that the share could trade lower. As the 5 to 8 week reading says, "wait for the lower time frames to stabilize". The ST & MT readings state that "the reward-to-risk is becoming attractive for a small buy/long position". This is how I'm seeing it...