JSE Top 40 Trade Idea UpdatesOne of the most frequently asked questions at present is whether the current rebound is the start of a new bull rally or whether it should be considered a ‘dead-cat-bounce’? The truth is that the most well-connected and well-resourced market participants do not know the answer to that question. For most traders, attention is drawn to the developments around Covid-19 and the subsequent actions by governments and the business community. In addition, much of the focus will also be on the actions of central banks which seems to have put a “floor” under equity markets for the time being. At present and as always, my focus is on the price action/charts to determine market sentiment for the short, medium and long term.
At a broad market level I think that this has helped us hit the nail on the head as we have managed to navigate these moves and calls which has provided exceptional opportunities on both the long and short side. Take the JSE Top 40 for example where our research flagged downside risk on 20-January which saw the market fall around 19,000 points which was followed by our note highlighting that ‘Red = Opportunity’ on 18 March which has seen the market jump by around 8,000 points. If you’re going to take one thing away from this, I think that it should be that market participants would do better by spending a large portion of their time on price action and charts and less on headlines. That being said, at current levels, bearing in mind that we have had a 31% jump off the lows, I am finding it tough justifying any aggressive long entries at current levels. In the South African context, our market had already closed when the President announced a 2-week extension of the 21-day lock-down. I mentioned that I would be very surprised if we see don’t see an aggressive bearish reversal in names such as MRP and TFG that were both higher by 12% on Thursday!
At an overall market level (JSE), I think it would be prudent to trim your short term gains.
