A whole lot of nothing

A week which opened up a little nervous but ultimately ended green.

The JSE Top40 (J200) opened at 23730 and finished at 24075 helped by a bit of a bounce in banks and industrials (SAB and RCH). For the rest it was a case of going nowhere fast.

Portfolio changes:

• Sold out of my long IMP call on Wednesday (IMPSBC) for a marginal profit - time decay was starting to bite into the warrant despite being in the money
• Switched into a long on SOL (again SOLSBG)
  

While I still maintain that IMP in the long run is a good call (especially with platinum gaining traction at the top end of the the $1300 range), the time decay on the asset is hurting.

Sasol seems to have built a nice base around the R290 mark (Friday close as well as warrant strike). IMP on the other hand has broken below R170 (the warrant strike) and coupled with the safety issues and the drop off in production - it maybe needs to do a few things right to tempt me back.

Having said that trade in both warrants was brisk over the week and for investors with a bit of risk appetite, they both seem to be an option.

Call update

Just a quick note - on Tuesday Impala Platinum rose by 1.85% to R166 after earlier in the day after hitting a high of R168.49 earlier in the day.

A quick look at trade in the US ADR has IMP trading at around R168.50 if the present Rand / Dollar exchange rate is used (R7.40).

There was a bit of a pickup in trade in my prefered call warrant IMPSBC with 469235 warrants trading hands and the warrant rising 3c to 27c - admittedly it didn't trade particularly much in the latter part of the day when IMP gave up some of its gains.

Last week I said I thought the dollar would bounce back against the Rand and it seems to have done so - albeit slowly and this is proving a positive boost for the rand hedge stocks listed on the JSE.

Long AUD
Speaking of currency related developments I picked up a currency trade via my Global Trader account which seemed to make sense to me.

This week we take a look at the Australian Dollar (AUD) a currency that has come up three times in our past reports and has continued to strengthen on the back of firmer Gold prices and the carry trade. The Reserve Bank of Australia (RBA) became the first central bank to increase interest rates this year, by increasing their cash target rate from 3.00% to 3.25% on 6 October. This increase took the market by surprise, as most analysts had expected the RBA to keep interest rates unchanged.

The question in most investor’s minds at the moment is will the AUD continue to strengthen against the greenback, or is the greenback oversold at these levels. We, however, continue to be bullish on the AUD as the currency continues to be backed by relatively stronger fundamentals than its peers. Year on year unemployment levels in Australia declined from 5.8% to 5.7% in September 2009, as the Australian economy continues to strengthen on the back of anticipated increase in demand from the Asian markets. Australia’s trade balance however continues to show a different picture as the trade deficit continues to remain relatively high, as it was recorded at $AUD1.5 billion in August. Australia continues to provide investors with higher yields for their investments.

The AUD is currently trading at its 52 week high at 0.9265 to the Dollar. We anticipate the AUD to continue its strong run against the Dollar with our eyes firmly fixed on the 0.95 resistance level. The AUD should continue trading firmer with 0.935 as the first resistance level and followed by 0.95 as the next level. On the down side we expect the currency to find support at 0.90 and then 0.88.

Their recommendation was long AUD vs USD at 0.92 with a stop at 0.90 and a take profit level at 0.935 which I will follow and see what result it produces.