Technical Tuesday Shaun Murison Trading Strategy

TECHNICAL TUESDAY 20 OCTOBER 2020

TECHNICAL TUESDAY

Table of contents

1 SOUTH AFRICA 40 INDEX Technical analysis of the local index

2 HIGHS AND LOWS Shares making new highs or lows over 52 weeks

3 MARKETS IN FOCUS USD/ZAR Spot Gold Brent Crude The BHP Group vs Anglo American Plc

SHAUN MURISON

Shaun has worked in financial markets for over ten years, and previously ran IG’s KZN branch before moving to Johannesburg. As market analyst, he presents our CFD trading seminars around the country. In addition, Shaun is a regular commentator on the local financial markets, contributing to various media (such as CNBC Africa and Business Day) and writing daily and weekly market reports. He is a registered person as well as Certified Financial Technician (CFTE). You can follow Shaun on Twitter at @ShaunMurison_IG for regular market updates and insight. TRADING STRATEGY AND MARKET UPDATE

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TECHNICAL TUESDAY 20 OCTOBER 2020

1. SOUTH AFRICA 40 INDEX

Since our last note, we saw a quick move below the 50715 level, to hit support at 50050 (black arrow) before rebounding back to the 50715 mark where the price currently looks to be settling. The South Africa 40 Cash Index continues to drift sideways at present in the short term. In the longer term we highlight the descending channel which has been in place which commenced in August this year. For a renewed long bias to trades, we are looking for a strong move to break resistance of the aforementioned channel. For conviction in a long trade setup we would like to see the breakout followed by a pullback towards channel support. For a short trade setup the resistance of the channel needs to be maintained, followed by an aggressive move lower. For now however, we maintain a neutral positioning on the index. Should a high conviction setup through a breakout or significant reversal emerge, we will update accordingly in the My IG section of the IG trading platform.

TECHNICAL TUESDAYS 20 October 2020

2. HIGHS & LOWS

SHARES | 52 WEEK HIGHS SHARES | 52 WEEK LOWS Afrox Lts None African Rainbow Minerals Omnia Holdings

TECHNICAL TUESDAYS 20 October 2020

3. MARKETS IN FOCUS USD/ZAR The USD/ZAR price continues to grind sideways, waiting for its next macro cues. There is now a smaller range considered between levels R16.35/$ and R16.70/$. Range traders might look for long entry closer to the R16.35/$ mark, targeting a move back to the R16.70/$ resistance level. In this situation a close below the low at R16.10/$ might be used as a stop loss consideration for the trade. We are only considering long trades on the currency pair while it moves closer to support of a much broader range (R16.35/$ to R17.80/$). New short positions on the currency pair would only start to be considered should a break below the R16.10/$ support level (also the failure level for a long trade) manifest.

TECHNICAL TUESDAY 20 October 2020

Spot Gold Gold has continued to grind sideways over the last week, finding little in the way of conviction in terms of short term direction. A near term price range is therefore considered between levels 1850 (support) and 1930 (resistance).

The price whipsawing through the moving averages (20, 50 and 200) highlights a broader range over the medium term, considered between levels 1850 (support) and 1980 (resistance).

The price is currently trading just above both mid-points of the aforementioned ranges. The Stochastic oscillator is trading around its mid-point.

All indications show that the price of gold trades in no mans land for now. Range traders might prefer waiting for price reversals closer to the support and resistance levels of the broader range before looking for new positions into gold.

However for now, we prefer a neutral positioning until such time as a new range trading or breakout trading opportunity manifests. . https://www.ig.com/za/news-and-trade-ideas/tesla-share-price--what-to-expect-from-third-quarter-results- 201019

TECHNICAL TUESDAY 20 October 2020

The BHP Group vs Anglo American Plc (Pair) The pair considers a Long BHP Group position against a Short Anglo American Plc position. The net result of these combined trades looks for a 11% profit margin. A stop loss is considered of equal proportion to the expected gain.

A successful pair trade can be realized 1 of 3 ways: 1. The long position rises while the short position falls 2. The long position rises faster than the short position rises 3. The short position falls faster than the long position falls.

The blue line on the chart represents the BHP/AGL ratio which currently trades at 2 standard deviations below the mean. A successful trade would require the ratio (blue line) to return back to the mean.