If you’ve been trading the JSE stocks for the last year, you’ll most likely agree with me, it has been darn difficult.
You buy and go long, and you get stopped out.
You go short and sell, and your stop loss hits.
You’re most likely feel like giving it up.
And you’re not alone.
Let’s delve into what’s been happening and what we can do to improve our chances of trading success.
I blamed South Africa – But I was wrong.
The JSE ALSI 40 has indeed been in a sideways range since November 2022.
• I blamed Load Shedding
• I blamed the incompetency of government
• I blamed thew downgrades and grey listing
• I blamed the low liquidity and volume on the markets.
But then, I went to see what was going on with the broader picture.
The contagion is global
Take a look at this chart below…
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These are four of the top markets overlaid on a single chart…
• ASX 200 in Australia
• CAC40 in France
• DAX in Germany, and the
• UK 100 (FTSE 100).
We can see the sideways range (which I call the Twilight Zone) has spread among many of the stock indices.
And there are many other stock markets worldwide trapped in this trading range.
So, what precisely characterizes the current market climate?
Well remember, there are four main market phases according to Wyckoff.
Accumulation, Mark-up, Distribution and Mark down.
The above chart doesn’t show upside, so it rules out the Mark-up phase.
Nor does it indicate a downward spiral, so no Mark-down phase.
Instead, it has continued to move in a sideways pattern for over a year.
I like to call this environment the capitulation stage.
This is where we’ll see low volumes traded while prices fluctuate unpredictably.
This creates that volatile (jumpy) phase.
We don’t know how long this range will last.
All we can do is react to where we are right now.
And right now, it seems like the market has chosen a direction – and it’s down.
We can see the JSE Top 40 index price has broken below the Rectangle formation (Blue shaded area). This is the first time since November 2022…
Now that it’s broken down, the next strong support will be at 56,483.
And there are ways we can profit from this downside!
Here’s how we’ll profit from the next 12.4% JSE ALSI crash
First, I’ll be looking to go short (Sell) a number of JSE stocks.
Second, I will be looking to buy (go long) gold and gold stocks. This is because when markets drop – people buy gold as a safe haven.
PS: While this may be one of the most difficult markets we’ve seen, Trader X has managed to achieve a phenomenal run of profitable trades in 2023. 21 winners, and only 3 losers in the 3 quarters completed to September! That’s an 88% win rate…. Go here to learn more.
