Friday, March 27, 2009

Implats short and Standard Bank short

What an excellent close to the month and the week. It is my view that the last Friday of the month is profit taking day. The reason? The traders need to pay bills. They need to close their positions generally speaking in order to cover their monthly expenses and start again in the new month. It also gives them the chance to spend some of the hard earned profits... It's tough being a trader you know!

Both the Resources 20 index and the Findi 30 index were way overbought from Wednesday but the market was still riding on the back of a major rally. The question really for next week is whether this rally was a bullish comeback or bearish rally? Some homework needs to be done over the weekend! Look out for my post about this on Monday!

But both the Resi 20 and the Findi 30 were overbought using the stochastic indicator as well as old highs. It was a matter of waiting for the trigger and the turn in the market. Did it turn!! Today the majority of the market has dropped down by around 5% in those sectors or indices.

Personally I was short Implats from 17252 yesterday and held it through to this afternoon for a fantastic profit. I was also going to short Standard bank, ABSA, First rand and Anglo American yesterday however I had a car licence renewal queue to deal with. This took me 3 and a half hours to secure. I find out I also need a roadworthy test as I am transfering the car into a trust.

Then the All Share Top 40 index signalled a short from 13h00 at 19500 which resulted in 500 pts of profit per contract!! The last two days on the stock market have made me a small fortune. I certainly cover my monthly expenses in just 2 days of short term trading.

Learn to use the moving averages and the stochasic with the RSI as your main indicators on the technical side... but it is vital for you to also understand the psychology of the market by using resistance and support lines and comparing global indices with your local ones and then sectors to shares etc.

I will be lecturing at a Derivatives workshop tomorrow. I need to go and prepare for that now. It is all about the theory of how the different instruments work and how you can take advantage of them to gear yourself and your portfolio.

Have a great weekend! For more info on short term trading visit

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Wednesday, March 25, 2009

Another Alsi 40 trade and market run

What a great day on the JSE!!

(I have neglected to post for a week and I owe my apologies. I'm working on a personal mentorship programme for people interested in learning from the very basic investment level to advanced day trading involving futures and ALSI which will take place over three months. Drop me a line if you have some ideas on this!)

The stock market had run so hard over the last 10 days that it was time for it to take a breather. Tuesday and most of today constituted that breather in the short term.

Besides the short trade from this morning which I missed as I was attending to a large beekeeping goods order. I also run a full time beekeeping equipment supply business. While I was getting my weekly prescription of manual labour packing out the order of bee hives, beeswax and queen excluders I was not at my computer.

There was a grand 200 odd pts trading there for the taking this morning in the ALSI 40 short trade. Then the market started to move sideways for a couple of hours.

So, as I worked on my personal investing & trading mentorship programme, I kept a beady eye on the ALSI. I noticed a swing change and challenge of the 89e happened but failed. The moving average worked as support confirmed by the stochastic. Check 1 confirmed!

An hour or so later I look again and there it is! The signal to go long on the ALL Share Top 40! Around 14h30 it gave the signal with the best entry price being around 19300 but waiting for one more confirmation meant watching with baited breath until 19360 with a stop at 19330.

I went long after 15h20 and then added again about 15 min later. This price was around 19410. My target was 19535 which was a resistance level during the live chart yesterday. The SNP500 and Dow Futures were up stronger and our ALSI took off. It wasn't long and my take protif was hit... in fact it was less than 20 min and I was out of the trade.

The trade still went on to 19670 odd after that. This would've added an additional 100 odd pts to my total for the day but I ain't complaining! Besides by adding to the position as it went up I effectively doubled some of the points I did make due to the additional leverage I was using... In essence I got like an extra 80 pts when I added more contracts to the position.

Good trade nonetheless! And the market closed quite well considering its opening...

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Tuesday, March 17, 2009

ALSI 40 and 400 points today!

ALSI 40 with 400 points today! Absolutely fantastic!

The market was look overbought since yesterday. It proved to be a call worth waiting for. The gap on the open of thursday last week was an exhaustive gap meaning that the move was losing momentum.

The 60 min and 15 min chart were saying the same thing from early this morning at 9h45 you should've been short from around 18030 and should still be short. for just over 400 pts right now. The low for the ALSI 40 today was 17490...

The end of day chart shows the 18200 level was the major resistance and that we could expect a number of days to the downside to follow. The trade short could be open until the end of the week even. It would need to be monitored of course.

One should've added to theposition at around 17710 to the short in order to gain from continued downside for the after session. This would have created an additional 200 pts for you on the second position which should be closed now to secure profits.

With the RESI and Findi both taking a hammering it was a matter of time before the ALSi top 40 gave way to the negative movement. Remember the Alsi Top 40 is made up of financials and resources shares in the main. If both take a pounding then you can be sure the ALSI will follow.

The market outlook for the rest of the week is quite negative. The futures close out happens on Thursday which forces all short sellers to buy back their shares. One can roll over to the June contract but this incurs a small amount of costs of 0.25% of the exposed position.

Generally, if you are taking any trades between now and Thursday be sure to ask for the June contract. Also NOTE: there is articificial buying pressure in our market currently due to the closing of short positions.

The same can occur at the end of the month when the Unit Trusts all close their books for quarterly reports. They tend to push the shares up in the last week of the quarter to improve their quarterly performance. Be aware of this too.

We also looked to short Anglogold and Anglo American and Standarad Bank today which have all gone smooth in the negative sentiment on the day!

Do you want to learn how to make money when the share prices are dropping? It's called shorting! Learn how you can make money in bad markets!

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Monday, March 16, 2009

Trading Alsi 40 index

From the 10th of March trading at around 16520 one was long on the 60 min chart and closed out at 17300 on the 11th laste for a whopping 800 pts in 24 hours trading ALSI 40 index.

Then a falling wedge formation starts to develop and it consolidates for most of the 12th and then breaks the upper trend line of the falling wedge at 16h00 on the 12th to go long again with an ALSI 40 target of 600 points from the 17200. Gives us a top end target on the ALSI 40 index of 17800 odd. We happened to break 18000 and are now battling at this level. Lots of resistance.

Today there were two very neat trades using the 15 min chart. Go long at around 12h00 today from 17900 to 18145 which is excellent. Followed by another trade short on ALSI 40 at 16h15 18870 down to the 50ema 17945 for another good number of points.

For more info on ALSI 40 trading visit the ALSI Top 40 Apprentice...

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Thursday, March 12, 2009

ALSI was good yesterday - Mixed today!

Well, the Findi absolutely flew yesterday with many signals triggering a rally to test the 17000 level again. Similarly the General retailers, Resources 20 and Snp500.

The ALSI respected this positive move by surrending just over 200 pts in a wonderful break out trade yesterday from 16992 to 17205 level with about another 150 points to spare as well... It topped out at 17350 in the 1st half session around 13h00.

It did present a short of about 100 pts shortly after that using a 5 min chart with a tight stop loss. Another positive divergence gave an entry long at 17235 to close out 100 pts later at the double top type formation. That was the day's trading...

I however only managed to get the 1st half session trade as I went to the JSE exhibit to meet some people.

Today there was a range of very tight numbers between 17100 and and 17150 for most of the morning. We had a break out at just after 10h00 with FTSE opening. this didn't last long however. It went to 17250 so there were 100 pts in it.

My platform's connection failed when I wanted to enter at 17210. Got in after that and then my stop loss kicked in on the pulled back to 17150 again. the hammer following the support at 17150 was good entry point and just about made my stop loss back.

Now we have a new range: 17150 to 17250. Interestingly 17250 is where we closed yesterday on the doji on 5 min candle chart.

Overall the 60 min chart tells me to expect some downside... The sectors are telling me a different story however yet they are based on end of day analysis. Assessing the ALSI eod it still looks good for the upside.

Effectively, on the end of day swing trade you should be long from 16200 and still holding. A possible target of 17535 is in the offering end of day.

Watch SNp500 with quite a positive candle pattern which has now been confirmed called morning star.

Watch Kumba for a possible rally by the end of the week. Copper also should rally leading the move in Kumba. Stop loss at 13790c which from the morning open is a 200c stop loss. The potential target to the upside is 15150c. It would also be good to see Anglo American and Billiton move up as well.

Right now Kumba is not a buy. But a prospective buy. The double top on Kumba suggests down side to 13200c first before it could rally. the range has been drawn with the top side being 17500c and the low end being 13000c. We are still inside the range but not at either extreme.

The 120 min chart suggests a turn by the end of today an a target of 15600c. The 60 min chart is very close to a buy. With a high risk tolerance one could take a punt on it with a stop loss a 13790c which would be around 350c at the price at the time of writing. Preferably, the entry should've been this morning at 14070c odd, if not lower. The support level is 14005c and for a really tight trade one could enter now with the risk you get taken out during the day due to volitility but then find Kumba closes up for the day.

Grindrod is closed as at yesterday when it reached my upper target above 1300c. Great short term trade!

Off to JSE open day again. Trade well! Not often. Come to our investor's club meeting in April!

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Tuesday, March 10, 2009

ALSI Update and Trade

Mixed morning ALSI Session

It took a while and much discipline to wait for this morning's ALSI trade.After waiting 2 hours for a set up that gave me a signal on my strategy, it finally presented itself.

We went long at 10h35 at 16518 level and closed for almost 100 points as the ALSI went to the top level of our morning range. The range was sitting between 16500 and 16600 for quite a while. It took the positive opening of the FTSE as well as support from strong trading on the SNP and DOW as well to push our stock market to the upside.

Overall market outlook for today is that we may see a pullback again in DRD GOLD which would be mainly fuelled by the gap it left at 887c. In addition to this possible downside also consider that there is a double-top setting up at 950c with a neckline at 767c which gives us a 180c (estimated) target to the downside if the neckline is broken.

Once again, my recommendation in this instance is to keep track of gold and silver. One can refer especially to the New Gold ETF in order to analyse the chart for a view on gold's position.

Grindrod has defied all the stock markets odds and went positive from our call at 1126c last week we have seen it go to 1220c which is not far from our 106c target. In essence, this amount does warrant closing if you are edgy about the market today. Considering the move by the FTSE after it's open one may speculate that JSE will look to the upside. One would do well to consider that a sell on Grindrod today could be a fairly good move considering the overall market sentiment is in negative territory.

To give you an idea of the short term trade on GND last week this is how it reads:

  • We call a long end of last week to enter at 1126c in the morning wih a stop loss level set at 1100c straight but utmost stop loss of 1080c due to the overall negativity of the market on Friday morning's open.
  • Based on the price of the share we would calculate that we would trade with 30 contracts which gives us an exposure to 3000 shares for only 15% of the capital required, if you decided to trade the shares instead of using single stock futures to trade.
  • So, if a contract price is R120 per 100 shares (there are 100 shares in each contract) I would have used only R3 600 plus brokerage in order to purchase 3000 x R11.26 = R33 780 worth of shares.
  • I sell my Grindrod shares at R12.20 which gives me a gross profit of 94c which is the same as if you had bought the shares.
  • We take the 3000 shares x 94c = R2 820 gross profit less brokerage of about R600 in total (estimated at higher end).
  • I make R2 820 using R3 600 which is 78% return.
  • As a share trader or someone using shares to trade on the short term you would have used R33 780 to make R2820 nett.
  • That is equivalent to just over 8% using the full capital instead of leveraging your capital.

Moral of the story? Learn how to trade with your capital and make it stretch using leverage!

BUT IT'S RISKY!! Ask the right questions! If Grindrod went to 1100c and we both had to close the trade due to the stop loss kicking in, what would we have both lost?

  1. In your example, the share lost 26c from 1126c to 1100c. Right? Take your 3000 shares x -26c = -R780 (loss) plus your transaction costs ie brokerage.
  2. In my example, the futures contract lost 26c as well. Take my 3000 shares or 30 contracts x -26c = -R780 (loss) plus my transaction costs.
  3. What's the difference? Not much! Right? Yes, I am!
  4. Is there more risk in trading futures?
  5. NOPE!

The risk only comes in when you overexpose yourself. If you are not aware of how leverage and margin works then you could get yourself into trouble. One should never, in general terms, leverage more than three times your portfolio size.

If your portfolio size if R50 000 you shouldn't leverage your trades to a value of more than R150 000. Effectively, you are controlling your leverage by keeping the margin you put on the table low.

You see, you could get leverage of 10 times on your account. This means that with R50 000 in your portfolio you could trade up to R500 000 worth of shares using a single stock futures. Don't go there...

Instead, come learn how to trade ALSI, Futures, Forex with us.

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Monday, March 9, 2009

Alsi & Market update

After a fun-filled afternoon on Friday with our market rallying after the US unemployment figures came out, it was a great way to end the week!

The SNP 500 closed down below the critical 700 level as I discussed it could last week. This bodes well if you can short the local stock market. It doesn't give me a warm fuzzy feeling about our local rally or bounce right now except for one thing: Resources.

The ALSI created a bullish engulfing candle formation at the close on Friday. This gives some impetus to the weak going forward being bullish. There is also positive divergence on the stochastic.

The trouble is that the ALSI is made up of the financials and resources. The financials are being hit pretty hard and so if the resources don't rally hard the ALSI could take a tumble.

The Resources opened fairly negative this morning with DRD gold being a star performer again last week seconded by Anglo Gold and Anglo American. Silver has the potential to trigger a falling wedge formation and therefore suggests further upside in gold this week.

After the gap in DRD however I suspect it may be exhausted. We may see a retest to the old high of 950c before it goes to close the gap at 887c. Be aware that the candle chart is showing a potential double top formation on DRD.

Grindrod, is certainly making a go of it. As we discussed late last week, the chart was looking very oversold. The assessment was to look to buy it at 1126c with a stop loss at 1100c and at worst case 1080c. This is with a view to take a short term trading profit of around 106c and a swing trade profit in equities at say 1303c. Note that this trade is against the overall trend as Grindrod is below its 89 moving average.

Yes and so it happened. The market fell out of bed from 9h45 with a great 200 point drop on the ALSI. I grabbed 160 of them and that's why the delay in this post this morning... I went short at 9h45 and was out at 10h10.

We are holding an investor's club meeting tomorrow night at Wanderer's Sports Club. You're invited to come along. Visit for more info.

Our Financials & Industrials index is falling like a hard rock in a big pond. This combined with the fallign resources will cause havoc on our local stock market - at least for the Monday morning session.

Resources seem to be following suit after the Financials heading south. Anglo Gold and DRD seem to be holding out as well as Grindrod. Watch these shares this week. Kumba opened way down today and is probably following a drop in copper prices. This will have an effect on Billiton, Anglo American, Metorex and other copper miners.

Trade well, not often.

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Thursday, March 5, 2009

Anglo American & Alsi Update

Yesterday was eventful.

We had the US unemployent come out and it was pretty bad. Worse than expected. So our market and many others went for a bath...

We went long in the morning for 150 odd points which was amazing and our long position in Anglo American hit target and peaked out at 15100. We took profit at 14921c which is a round figure profit of R13 per share using single stock future contracts x 3. This means we had 3 contracts x 100 shares per contract. Brokerage is about R600 give or take depending on who you are trading with...

So our profit there is R13 x 300 less brokerage of R600 which gives us a total nett of R3900 - R600 = R3300. Not too shabby for a 2 day trade.

The ALSI gave up over 400 pts yesterday using the day trader trend indicator I was able to take the long, then a short as well as another long in the afternoon. The last long was at 16h25 at 16430 and out at 16685 for just over 200 pts. The volatility in the market can really benefit one if you are able to ascertain the trend intraday but also to gather swing points using various trading techniques.

We went long this morning with the resistance being 16454 end of day as well as 16450 intraday. As the market opened this moved to 16430 which is our top resistance. I closed at 16411. We opened at 16368 for 40 odd pts. Which pays for lunch.

Now the market is range bound stuck between 16420 and 16270 and could be traded within this range perhaps one more time. It does depend on the FTSE open. We may see a break of 16420/430 to the upside however the general end of day trend is bearish....

There is the opportunity that the market will swing depending on the FTSE open. This will signal a chase to close the gap at open. that gives us a target of 16470, followed by 16531, 16651/685 to the upside.

Watch DRD again and ANG as safe haven investors take refuge in the gold shares again...

Keep an eye on Grindrod as at 1100c it is quite oversold. 976c is ultimate support for the share with the next few weeks going forward we could see it head there to test it. However the short term over the next few days we could see a bounce with support at 1100c. A stop loss at 1100c would be more than sufficient for a reward of 106c per share to a max of 1311c from its current level of 1126c.

We broke 16450 and traded again going long keeping a ratchet stop loss at our resistance level now support at 16531.

Good trading.

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Wednesday, March 4, 2009

ALSI Top 40 is Tops today!

The ALSI Update

What a fantastic day on the ALSI. I wasn't able to enter the trade on the ALSI at the open and hence saw the index run away from me for most of the morning session. The support of 16071 held and played its part perfectly.

The Fibonacci also confirmed the support with it being at the level of 161% extension to the downside from the previous high end of day. The other short term indicators also confirmed that the market was very oversold on the 60 min as well as end of day.

So, patiently I wait for my entry trigger with support of 16060 as stop loss main. My live chart's main support is 16125 with a resistance level of 16681. The 60 min has told me I can go in but the 15 min chart has jumped the gun and doesn't give an entry until 11:00.

Go long at 16618 and close it at 16763. Swing the trade to the downside from 16737 in a short trade to close 16557. This trade is followed by another long at around 15h35 at 16595 to close out at 16685. That is business done for the day.

In total we are talking 145 +180 + 90 points which equals 415 for the day!
That makes up 80% of my week's target in a single day. In a case like this it's best to go play golf tomorrow.

And the overall trend was certainly weak and the retracement or bounce in the market was expected this week as discussed in my newsletter. The newsletter is available by visiting Investor Newsletter which is a Free weekly Market Outlook.

Pretty much all of the sectors were screaming for a bounce otherwise known as a retracement after a move into an extreme situation. Resources, Financial & Industrials, as well as the General Retailers all were primed to do the same thing. The set up was ready and wound. It just needed to be released.

What was going to have the effect of releasing the hounds of the bounce? It could well do with the Chinese Rescue Package coming out later this week. With the Chinese economy being resuscitated it could be the driver the commodities need in order to rally for an upswing over a few weeks, perhaps days but it would be short term.

Our call on the Anglo American trade in our investor newsletter and on the blog earlier this week gave us a late entry yesterday afternoon but at the lastest for end of day buyers to get in first thing this morning. Our entry was yesterday afternoon at R136 with the view to take between 8-10%. This is the structure of my trading plan. I do suspect that the swing could be carried forward until Friday unless the US closes down before then.

So Anglo American pretty much met my trading plan target when it hit R147 and some change intraday. I also use LIVE charts to time entries as well as exits from the market.

Both Kumba and Implats were on our radar as well this week. But have you seen the drop in Grindrod? over 20% in this week alone. It is usually one of my shares to follow. This time round it left me behind. I will ensure that I am looking for the retracement there as well. When it moves it goes for quite a distance before momentum is lost.

Good trading today. Do you want to learn more? Come on the ALSI Apprentice programme.

The real question to be tackled is, whether this rally could be the market turn around point for the stock markets going foward? Some work needs to be done on this topic. Catch you next time...

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Monday, March 2, 2009

ALSI Update

Since the original negative outlook on the ALSI 40 since 16th Feb, we have had a fall of another 1900 points. The 16191 level is old support from Nov 08. This level was broken this morning as the gap on the open raced passed this level to 16071 before bouncing from this level to challenge the gap.

The 60 min outlook on the ALSI is a recovery to 16430 level as resistance but first the gap must be closed at 16494.

With my next Fib level being 16700, how close did the ALSI get to that before turning south. The short triggered now at 17h15 has reaped 200 pts and ought to be closed about now.

Gold recovered well today with AngloGold up 3% and DRD both up after the pull back. That was great. Anglo American is very oversold and indicators imply that the share could experience a retracement/bounce with R134 being a fair support level. The upside target later this week is around R154.

Both Kumba and Implats had sterling days on the market clsing up 7% and 9% up respectively.

Keep an eye out for our new Forex Mentorship

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