Technical Tuesdays

4 February 2014

Our weekly technical report is compiled by in-house market analyst Shaun Murison.

In the report this week we look at the South Africa 40 index, key indicators as well as the following equities:

Sasol

FirstRand

Barclays Africa Group

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Company data

Dividends

Economic catalysts

South Africa 40 index

Technical view

The SA40 index has broken support at 40450 with the short-term trend confirmed as down, while the price trades firmly below our 20 day simple moving average (20MA).

Continued short-term weakness favours a move towards support at 39100, a break of which anticipates the next support level at 38250. The long term-trend remains up, however should the short-term weakness continue and the aforementioned levels be broken the long-term trend direction will be questioned.

The level 40450 to 40600 is anticipated as resistance and the short-term downtrend will be favoured, unless this resistance is broken by the price closing above the level.

Equity in focus

Sasol

The price of Sasol has retraced off recent highs, and looks to be finding support on the previous resistance (dotted blue line).

The move down shows the price in a falling wedge formation (black lines encompassing price). In the current context, the formation highlights a slow cumbersome move down after a strong move up suggesting that the momentum remains bullish.

With this in mind, the pattern favours a move back to resistance at 54200, a break of which predicts further gains towards the recent high at 56000. The price closing below wedge support at 51650 would consider the bullish indications to have failed.

FirstRand

The price of Firstrand has broken out of a double top formation (“M” shape above 3220).

The double top is considered a reversal pattern in that it warns of the preceding uptrend reversing. The height of the pattern projected from the breakout area at 3220 predicts a further downside target at 2890. Often, after the initial breakout, the price will rebound towards the breakout area before resuming weakness.

A rebound could offer those trading this type of pattern a better short entry price, thereby improving the risk of the trade relative to the expected reward. Provided the price does not close above 3220, the projected target at 2890 remains favoured.

Barclays Africa Group

The price of Barclays has broken out of a triangle formation and looks to be continuing the preceding downtrend.

The height of the triangle formation projected from the breakout level predicts a target at 11850, while the price closing back above the 13020 level would indicate the failure thereof. 

 

 

 

 

Market overview

A Technical Analysis overview of key indicators and sectors with regards to trend, volatility and overbought/oversold conditions.

Click to view this week's market overview

 

 

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