How to trade the JSE's sideways market

by , 13 August 2018
How to trade the JSE's sideways market
Take a look at this chart...

 
See the big fat flat red line – that means the JSE is going nowhere fast. There is no strong rise or fall. In fact, you might say its flat lining.
 
For a trader, we call this a sideways market and this is the perfect picture.
 
Above is the daily JSE All Share Top 40 Index chart since January 2018!
 
Anyone who’s tried to trade this market, has not seen much success including me….
 
But there is something you can do about it.
 
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First – Let me show you how to identify a sideways market…
 
Step #1: Show at least six months’ worth of price movement. 
 
When you open a daily chart, make sure you can see at least six months of price movement.
 
This way you’ll have enough room to see and analyse the general direction on where the market has moved and where it has a higher chance of going next.
 
Step #2: Confirm the sideways market with your finger
 
You have six months’ worth of data, now you need your finger.
 
Take your finger and start off on the first bar of the chart ad move it to the last bar.
 
Ask yourself.
 
“Is my finger higher, lower or at the same place than where I started?”
 
If your finger is higher, the market is in an uptrend.
 
If your finger is lower, the market is in a downtrend.
 
If your finger is at the same place, the market is in a sideways trend.
 
As we’re dealing with a sideways market let’s bring back the ALSI chart.
 
JSE All Share Index – Sideways trend 

 
If you move from the first bar to the last bar on the daily JSE index, you’ll see that your finger will move sideways.
 
This is what I mean by flat-lining.
 
For the last six months the JSE ALSI hasn’t budged. It started at 51,413 and currently the market is at 51,413.
 
This confirms that we are in a sideways market.
 
The next step will tell you what to watch out for and how to trade this sideways market.
 
Step #3: Know where the floor and ceiling level is with a chart
 
With trading, there are two levels you’ll need find where a market bounces up and down on.
 
1. Support – Where price bounces on what looks like a floor level
2. Resistance  – Where price bounces on what looks like a ceiling level
 
Let’s bring back the JSE Daily chart…


You’ll need to add a resistance and support to the chart to define the sideways range.
 
To do this you’ll look for the highest and lowest prices the ALSI bounced on.
 
In this case, the resistance is at 52,806 and the support is at 48,618,
 
Between these levels is the tight sideways range the ALSI has been moving in the last six months. 
  
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There are two ways you can trade this sideways market 
 
1. You can either buy the ALMI (All Share Mini CFDs) every time it bounces on the support and sell at the resistance for a quick profit.
 
2. You can wait for the ALSI to break above the resistance or below the support to ride the new trend which the ALSI is expected to go in the future.
 
Now you know how to identify a sideways market and trade it.  
 
Always remember, “Wisdom yields Wealth” 
Timon Rossolimos,
Managing editor, Red Hot Storm Trader



How to trade the JSE's sideways market
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