Sunday, 31 December 2017

Disclaimer

All opinions expressed on this blog are the individual’s personal perspective and cannot be interpreted as a Buy/Sell indication!

It is strictly for informative purposes only!

Saturday, 30 December 2017

MARKET AND/OR SHARE DIRECTION / MARK EN/OF AANDELE RIGTING



GROUP DISCUSSION:

HOW CAN I ANTICIPATE IN WHICH DIRECTION THE MARKET AND/OR MY SHARE/S MAY GO?

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WHAT HAS THE FEELING IN MY GUT, GOT TO DO WITH ANY OF THIS?

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Many regards / Baie Groete,

Hendrik de Jager.







Saturday, 14 October 2017

Tradable “Chart Patterns”

The tradable “chart patterns” are the following:
#CHART PATTERNBR 
1Support and ResistanceXX 
2Trendline Break and ReversalXX 
3Saucer FormationsX  
4Fibonacci Retracements X 
5Price GapsXX 
6Volume Climax and Volume TrendXX 
7ConsolidationsX 
 
These patterns are classified into two basic types: momentum (breakout) and exhaustion (reversal).

1 Support and Resistance
Support and resistance have been used for a very long time by technicians and anyone who watches markets, even fundamentalists! Support is a level or area on the chart under the market where buying interest is sufficiently strong and the invers, selling interest at resistance levels.
It is often difficult to determine whether a support level will hold or be broken. That is why we are discussing this pattern first. It is the weakest and most difficult to use.

2 Trendline Break and Reversal
Trendlines are perhaps the oldest tools known to chartists. Trendlines form across peaks and valleys called pivot points —r elative highs and lows in a chart. As more points form along a line, it becomes more “established.” This means that, when the line is broken,  it  will  likely  follow through with a strong move in the new direction.
The best angle on a line for breaks is 45 degrees. The shallower the angle, the less pronounced any breaks are likely to be. Conversely, for trendline reversals, you want to see a shallow angle formed by the trendline — 20 to 30 degrees or so is best.

3 Saucer Formations
Saucer patterns are fairly rare, but are usually very predictive. The saucer pattern shows a gradual change in trend as it develops. It is important that the formation show a clear arc with tight trading ranges at the bottom of the arc.

4 Fibonacci Retracements
Gann was probably the first trader to use Fibonacci retracement ratios. The Fibonacci number sequence occurs in nature frequently (1, 3, 5, 8, 13, 21, . . .).  Ratios of these numbers to each other form the values 38%, 50%, and 62%. As it turns out, these are very close to the Gann numbers 3/8 (37.5%), 4/8 (50%), and 5/8 (62.5%), which he used over and over in his chart calculations.
The Fibonacci retracement phenomenon happens over and over in markets of all kinds. Essentially, you look at the most recent significant low and high, and make measurements on a move between these points. Measure the 3/8 point (38% of the distance from the last pivot) and look for a reversal there. If it doesn’t happen, move on to the 4/8 (50%) point and finally the 5/8 (62%) point.
A good rule of thumb is to enter a trade on 50% retracement but exit a trade at 38%.

5 Price Gaps
Gaps are basically points of high or low demand. Usually, the pent-up buying or selling pressure that forms the gap will follow through in the general market with more buying or selling.
Breakaway gaps occur at the ends of moves, in the opposite direction. They are usually the most profitable and easiest to trade.

6 Volume Climax and Volume Trend
Volume climaxes are beautiful patterns that are about 90% accurate in terms of predicting a reversal move tomorrow. When they occur, the market will likely move in the opposite direction — we just don’t know how much.
So, when you find a security that exhibits a volume climax, bookmark it and wait for the next one to form!
Volume climaxes are particularly accurate at the end of long moves, near significant market tops or bottoms, or near
Fibonacci retracement points (38%, 50%, 62%).


7 Consolidations
A consolidation is a place where buyers and sellers are very closely matched in numbers. As the battle ensues, others (on the sidelines) notice that the market is consolidating, and begin considering getting on board. As soon as a breakout to the upside (or downside) occurs, the latent buyers (or sellers) usually begin taking positions. You want to look for places where price moves outside the trading range that forms the consolidation, on increasing volume.
 

Wednesday, 30 August 2017

Trading in Pairs

Finding Trading Opportunities:
 
By using linear regression techniques and the theory of return to the average, to identify trading opportunities in the equity market on the JSE. Linear regression is used to identify the general trend or direction that follows the share price. When the share price drifted too far from this linear trend, the average return theory indicates that the share price must adjust to its linear trend over time. These techniques can be used to identify the bargaining opportunities when a share price has traded too far below its trend, or sales opportunities than the share price trade well above.



Looking at the relative movement of two shares that follow each other due to fundamental and / or economic factors. Shares in the same industry, such as two local banks, gold mines or retailers, are a good examples. Then trade the divergence (A & B) or better the return to the mean.

By analyzing the relative mediation of these shares by using the same linear regression and average return techniques, a number of trading opportunities can be identified.
 
 
Or differently plotting both the relations onto one graph to highlight these action areas.  Below we can clearly see that GFI has outperformed ANG and a possible pair trade can be constructed.



Delving for possible correlated pairs:

The correlation coefficient (a value between -100% and +100%) tells you how strongly two variables are related to each other. A correlation coefficient of +100% indicates a perfect positive correlation. As variable X increases, variable Y increases. As variable X decreases, variable Y decreases. The other end of the coin, a correlation coefficient of -100% indicates a perfect negative correlation. As variable X increases, variable Z decreases. As variable X decreases, variable Z increases. Lastly a correlation coefficient near 0% indicates no correlation.


From the JSE Top 40 shares, I do find the following relationships:



Long/Short Pairs Trading:

Trading in pairs is a slightly more advanced strategy. This strategy uses derivative instruments such as contracts for difference (CFDs) or futures contracts to implement a market neutral, zero equity exposure strategy and requires a derivative trading account. Very big words there, allow me to explain.
 
By using derivatives, an investor can sell a share, which means that you will realize a profit when the share price decreases and vice versa. Short trading of a share is opposite to hold a share. If you buy Long the same amount in one share, than you are in another Short position, you have a net equity exposure of zero.

Using the same example as above, you can implement a market neutral strategy to utilize the deviation in the relative price movement of Nedbank and RMB Holdings Ltd (RMH:Johannesburg). A market neutral strategy means that you can make a profit regardless of the overall direction of the market. In this example, we expect Nedbank to perform better than RMB Holdings Ltd (RMH:Johannesburg), as RMH has deviated from its overall performance against Nedbank.

Long the shares that you expect to perform better (NED) and Short these you expect to underperform (RMH), your ownership will be in a profit as the relative price movement of the two shares is corrected against the General trend. The big thing about pare trading is that you can realize a profit, regardless of whether or not the share prices for the two shares involved, go up and down. The only thing that has to happen is that Nedbank should perform better, ie. higher than or less than RMB Holdings.

Pros:
Market Neutral
Less Volatile
High % Hit rate


Cons:
Risk Management is hard
Higher Margin needed for these two trades at once
Double Cost as you open two trades at one time
 
As you can see, applying these simple techniques can help an investor identify numerous trading opportunities and ultimately enhance the returns on their portfolios.

A wise man once said: “Opportunities are usually disguised as hard work, so most people don’t recognize them.”

Note:
 
As always, it is advised to double-check the validity of any trading opportunity identified by technical analysis with a healthy dose of fundamentals. If a company has just released a dreadful trading update and their share price falls, it might look like a bargain, but it is trading at those levels for good reason. Check out the SENS for all the latest company updates.


Trade with caution as the markets are very unstable and uncertain.
@Duplo123 or join us on Skype

Sunday, 20 August 2017

ANG

AngloGold Ashanti conducts mining operations in Africa, North and South America and Australia, and undertakes exploration activities in some of these jurisdictions and in other parts of the world. more.....


On the weekly chart we notice that the stock price has started to consolidate in a descending triangle or fallowing wedge pattern. While the momentum has turned and currently building.


Zooming in on the daily chart, we clearly noticed the price break (C) on high volume. The momentum indicator is currently within a compression area (A) and supporting (B) the price action (C).


The price is also at a neck line of a very ugly inverted Head-and-Shoulder pattern.  The measurement leaves us with a target of 148 / 150 price area. About 10%.


Trade with caution as the markets are very unstable and uncertain.
@Duplo123 or join us on Skype