In the last few weeks, we've finally seen good news come out for South Africa.
I don't want to go into too much detail, but I'll highlight a few of the main points including:
• More businesses and economic activity has started to resume since moving from Level-5 of the lockdown down to Level-4.
• The government has told South Africa that there will be no more load-shedding from Eskom during lockdown.
• The SA Reserve Bank cut Interest Rates by 1%.
Note: This means South Africans will pay a lower interest rate on the debt they owe to the banks. And investors will deposit their money into stocks and funds with higher returns.
• President Ramaphosa has highlighted the measures the government will implement in order to help SA during the pandemic…
Since the good news has been spreading throughout South Africa, since April, the ALSI 40 has already managed to rally 27% (from 36,000 up to 45,985).
And as the lockdown levels continue to drop and the government measures come into effect - we can continue to see business and consumer confidence rise once again.
In this article, I will explain why I expect a V-Shape recovery in the next few weeks…
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Companies, individuals and our President to save South Africa
We are just over a month, since the first case of COVID-19 hit South Africa…
And already we have had an incredible effort from top companies, individuals and our government come to the economic rescue of SA.
Some of these include:
• CEO of Tiger Brands who donated resources to feed over 30,000 families – two meals every day.
• President Donald Trump who donated R410 million to South Africa’s relief fund.
• Outsurance owner – Willem Roos – donated R29 million for food, parcels, protective equipment and business rescue funds to South Africa.
• President Ramaphosa announcing a R500-billion package. This includes a R50-billion six-month coronavirus relief grant, R100-billion for jobs and R70-billion in tax relief.
Even JSE CEO Leila is impressed with the stimulus package to take into effect. Here’s what she said…
"I think what is different now to what happened in the Great Depression is that stimulus plans are much faster to be deployed. We are a month into this crisis and we have seen massive stimulus plans,"
Also, when it comes to the JSE, we’ve already seen a major rally in a couple of sectors including…
The resources index has rallied over 14%
The industrial index has moved up over 6%
And the Financial sector has jumped over 7%
Right now, as things stand…
I couldn’t be a more proud South African, to see the effort that goes in to protect our people, economy, stock exchange, and our confidence…
And for these reasons I’ll be buying the JSE All Share Index 40. And you guessed it, the charts are showing upside to come as well.
Why I expect a V-Shape recovery for the ALSI40
Looking at the JSE ALSI 40 chart, you can see since 12 March 2019, we’ve seen the index move in a V-Shape (Shaded area).
The index has moved from a high of 45,884 down to a low of 33,689 and back to the high at 45,884.
However, in the last week, the price has finally broken up and out of the high level showing that the buyers are back in control.
With all the points I’ve mentioned today, we can easily see the index rally to new monthly highs.
In fact, if we take the difference between the high and the low price and add it to the high price, we’ll have my next price target for the JSE ALSI 40.
Price target = (High – Low) + High
= (45,884 – 33,689) + 45,884
This means, we could have a V-Shape recovery of over 26% in the next few weeks.
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Here’s how I’ll profit from the V-Shape recovery
There are two ways I’m going to take advantage of the JSE ALSI rally.
First I can buy the ALSI-CFD and hold it until it hits my price target at 58,079.
Also, I’ll be looking at the main stocks and sectors that rally when the JSE moves up.
I’m talking about buying stocks in the financial, resources and industrial sectors. You can see all of my trade ideas when you join Red Hot Storm Trader…
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This year, Timon has been on fire when it comes to buying resources on the JSE
He’s sent out 7 trade ideas and has been correct 5 out of 7 times including:
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