Q. “While the JSE ALSI 40 moves sideways what can I do as a trader to either take advantage of the current sideways range and what can I do to protect my positions?”

A. Look, whether the market goes up, down or sideways – there is always an opportunity to ride the range.

But this will depend on your trading personality and risk profile.

Here are some ideas:

#1: Look into intraday or day trading

Intraday trading involves buying and selling securities within the same trading day.
Day trading means you hold for a matter of days.

By dropping the time frame you can take advantage of price fluctuations within the same day or over a couple of days.

Of course to identify these opportunities requires a lot more poring over charts to identify high probability trades.

#2: Make use of a trailing stop loss.

The trick with range bound markets is to ride the trend as long as you can using a stop loss.

That way, if the market changes direction you’ll be able to protect your gains and minimise your losses thanks to the stop loss.

I do this with all my trade ideas in Red Hot Storm Trader.

#3: Risk less per trade

Generally when markets move sideways, they’re more volatile due to the uncertainty.

The simplest way to protect your portfolio is to simply risk less per trade.

If you were risking 2% on average, you can drop this to 1% or even 0.5%.

#4: Diversify into other markets

Diversification is a key risk management technique.

If you’re only trading stocks or one index, and that market is moving sideways – look to trade other markets.

When you spread your investments across different markets or asset classes, you can lower the impact of a poor performance in any single market.

Q. “Timon can you share your weekly analysis on where you expect the JSE ALSI 40 to go? I’m a bit lost with this sideways range.”

A. Sure, I’ll be happy to share a short term view with the JSE ALSI 40 this week.

Remember, in the medium to long term – I expect the JSE ALSI 40 to rally! But while it is correcting, we can take advantage of the short term downside.

Let’s look at the JSE ALSI 40 index for the week.

JSE ALSI 40

The JSE ALSI 40 is in yet another sideways range – What I like to call the Twilight Zone.

There are three things I see.

1. A sideways motion with the current trend.

2. The previous trend was down (Arrow on the left).

3. The indicators are also indicating short term downside

The bearish bias part of it is that price is below 200MA (Black line).

The RSI is showing lower highs (Bearish divergence).

This means, the indicator is showing downside to come for the price as well.

And with the low price activity and little conviction, it is more likely for us to see downside this week with the JSE ALSI 40.

If the price does break below the Symmetrical Triangle, we could see the next target at 63,460.