Technical Tuesdays

1 July 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 currencies:

EUR/ZAR

USD/ZAR

GBP/ZAR

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Company data

Dividends

Economic catalysts

South Africa 40 index

Technical view

The retrace which was experienced last week ended with a bullish hammer candle formation, marked with a red arrow. Circled in blue we see the start of the reversal confirmed with a bullish engulfing candle formation.

The price has now returned to test all-time high resistance at 46400. A confirmed close above this level favours further gains towards the upper trend line resistance at 46900. The guidance remains in favour of the long-term uptrend which remains firmly in place. Trend followers would look for long entry if the aforementioned breakout occurs or alternatively near support at 45160 in the event of a short-term retrace off resistance.

The low marked at 45160 becomes important for those looking for signs of a change in directional trend from bullish to bearish and will be monitored in the event of a price pullback.

If the price starts to trade below this level it would indicate that (in the near-term at least) we are now starting to make significant  lower lows, a building block for a downtrend. However this has not yet occurred and as a result, the upward trend bias is given preference.

 

Source: ProRealTime charts, as of 01/07/2014

Currency in focus

EUR/ZAR

The price action has formed an inverse head and shoulders formation which warns of a possible bullish reversal, which would equate to further rand weakening.

The pattern is however not yet complete, as the price has not yet closed above the neckline resistance at R14.70. Should this occur, the pattern favours a move towards R15.35 while the price closing below the right shoulder labelled “R” at 14.40 would render the pattern to have failed or lost its validity.

Daily EUR/ZAR chart, as of  01/07/2014

USD/ZAR 

The price action has formed an inverse head and shoulders formation which warns of a possible bullish reversal alluding to further rand weakening.

The price has technically broken out, validating the formation before moving in the opposite direction to test the right shoulder labelled “R” at R10.55. Those questioning the validity of this initial breakout would wait for confirmation of a close once again above neckline resistance at R10.80.

The pattern favours a move towards R11.25 while the price closing below the right shoulder would render the pattern to have failed. 

Daily USD/ZAR chart, as of 01/07/2014

GBP/ZAR

The weekly price action of the GBP/ZAR shows a double bottom formation alluding to further rand weakness.

The pattern has completed with a break of resistance at R18.00, followed by a retest of the level as support. The height of the pattern projected from the breakout level projects an upside target at R18.70 while the price trading below trend line support at R17.60 would indicate the failure of the double bottom formation. 

Weekly GBP/ZAR chart, as of 01/07/2014

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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