Every morning I send our clients something called a ‘Morning call’.
It’s basically a prediction of where the market will open, before it does.
It’s a calculation that takes a number of factors into consideration, and gives you an indication on where the Top 40 index will trade when the market opens!
Imagine having that kind of information at your fingertips?
That’s why, if you know how to use the Morning Call properly, it can give your trading a serious edge.
Let me show you how it works…
The 4 main factors I use to determine the Morning Call
I look at four specific factors that help me calculate the morning call.
Morning Call Factor #1: Dual Listed Stocks
Dual listed stocks are basically companies that’re listed on more than one exchange.
For example companies such as Investec, British American Tobacco, SAB to name but a few are listed on the Johannesburg Stock Exchange and London Stock Exchange.
These companies should trade at parity on the different exchanges, meaning that their prices should be the same.
Remember that London trades an hour or two longer (depending on day light saving) after our market closes.
This means that whatever happens to the Dual listed stocks after our market close, should effect the morning price when trading commences on the JSE.
Morning Call Factor #2: How overseas markets traded overnight
Developed markets, such as in Europe, the US and China are leading markets and usually sets the trend from which we should follow.
In calculating the Morning Call I look at the most important markets and analyze how they traded overnight.
Morning Call Factor #3: Currency
I also look at currencies.
Well, currencies like the ZAR, GBP and USD will all have an effect on our Dual listed stocks (see factor #1).
I specifically look at the ZAR and GBP relationship.
If the rand weakens against GBP, this should have a positive effect on our market open.
Morning Call Factor #4: Futures
Futures from developed markets such as the Dow Jones and S&P 500 are important to look at for the Morning Call.
If the S&P 500 closed positive and the futures are also positive, this would result in a strong J200 open.
The same works the other way around, if the S&P 500 closed negatively and the futures were also negative, this would result in a weak J200 open.
I use these four factors, and a couple of other small indicators, to produce a Morning Call on where the Top 40 index will open.
To give you an idea of what a Morning Call would look like, here’s an example of what you would receive:
“Morning Call: Calculating the J200 (Top 40) + 270 points. Asia strong this morning so should support our local markets.”
So, now that you know what a morning call is, and the factors I use to determine ours I want to show you…