Timonrosso

Medium probability - Reversal Symmetrical Triangle on ALSI 40

Short
JSE:J203   ALL SHARE INDEX
Here’s why I expect the JSE to plunge 10%...

Reason #1:

When world markets crash, South Africa goes down with it
As global markets plunge, history has shown us the JSE will follow suit!
Last week alone, global stock markets closed down over 2% in one day because of the coronavirus:

London's FTSE: -2.5%
European Stoxx: -2%
France’s CAC: -2%
Germany's DAX: -2.5%
Shanghai Composite: -2.7%
Japan's NIKKEI: -2.2%
The JSE : -2.7%,

And with the rate that the virus is spreading on a daily basis, the world markets will continue to drop as investors flee away from stocks due to the uncertainty and fear the virus can bring to the companies.

Unfortunately, we’ll need to wait it out until we see the number of cases (from the virus) start to slow down – before we see a market rally again.

Reason #2:
Drop in Chinese visits

As the global outbreak has spread to over 13 countries, including the US, there are serious measures being implemented to try to contain the virus.

And as the virus continues to spread, South Africa will eventually feel the impact .

In fact, Efficient Group Chief economist Dawie Roodt explained that South Africa will be affected in three ways…

“The first is through the real economy if other countries start closing borders, affecting trade and tourism . The second is through the financial markets and its impact on commodity prices and exchange rates. The third is if the virus also arrives in South Africa,”

With less international travel, with fewer businessmen and tourists arriving in South Africa, this will cause a disruption to the economy.

This is because Chinese tourism has become a major source of foreign exchange income for South Africa.

Finally… - my charts confirm it!

Reason #3:
The charts point to double-digit losses on the JSE

Looking at the daily chart of the JSE, it’s been forming in a negative triangle formation for the last two years.

Based on the global reasons above, I now expect the price to break below the bottom of the triangle.

Once this happens, selling pressure and panic will kick in and cause the price to drop to the bottom of the triangle.

In this case my first target to hit is down 10.9%....

This is a medium probabiility trade as knowing the change of market sentiment, anything can happen... UNtil it hits the stop loss, my outlook is bearish ...
Trade closed: target reached: The JSE struck it's price target way sooner than I thought...

This is all because of Black Monday (9 March 2020) where the world stock markets plummeted following Brent Crude's biggest drop since 1991...

I am definitely not going to buy at these levels as a price war has now struck the world and because the price levels are down...

Thanks...

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