Technical Tuesday

1 September 2015

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:

BHP Billiton Plc vs Sasol Ltd

Imperial Holdings Ltd

Barclays Africa Group Ltd

South Africa 40 index

Technical view

The  South Africa 40 cash index rebounded from oversold territory last week to trade marginally past resistance at 43830 before forming a Bearish Harami candle pattern (circled red), suggesting the end of the short-term move up.

The price has now reversed to continue the underlying downtrend in place. A short-term closing low at 42030 provides the initial downside target, which if broken further favours a move to the recent intraday low at 40720. Should the price action change its short-term course and close above 44560, the near term downside momentum suggested would be deemed to have failed.

Click here to view South Africa 40 chart

Equities in focus

BHP Billiton Plc vs Sasol Ltd

The chart considered is that of BHP Billiton (candlestick) with a Relative Strength Comparison (RSC) indicator added. The RSC (blue line) compares the price of one security with that of another in a ratio format. The RSC has experienced a decline in value recently which highlights that security 1 (Billiton) has been underperforming security 2 ( Sasol).

Bollinger Bands have been added to the RSC and highlight the underperformance of security 1 reaching abnormality relative to the usual relationship of the two securities. It is expected that the relationship between the two securities will revert back to normality favouring a possible pair trade opportunity i.e. long Billiton, short Sasol.

The target from the technical indications would be for the RSC to move back towards the 20MA (red line) which is regarded as the mean. This could occur with the price movements of the securities in a number of ways:

  1. Billiton rising and Sasol falling
  2. Billiton rising faster than Sasol rising
  3. Billiton falling slower than Sasol falling.

Should one of these scenarios play out successfully the expectation would be for a net gain of 6.4%. A stop-loss would be considered equal to the anticipated gain of 6.4%.  

Click here to view the BHP Billiton vs Sasol chart

Imperial Holdings Ltd

Imperial Holdings looks to have formed a bearish price reversal off resistance at 18730. The Stochastic Oscillator has crossed its signal line, whilst in overbought territory supporting the price reversal.

These are considered short-term bearish indications with the initial support target considered at 16560, a break of which considers a move towards gap support at 15920. A rebound and close above resistance at 18730 would consider the failure of the bearish indications.

Click here to view the Imperial Holdings chart

Barclays Africa Group Ltd

Barclays Africa Group is breaking out of a pennant formation (red triangle). The pattern highlights a short-term pause in the downtrend, which now looks to be resuming.

The recent low at 16475 is the initial support target favoured, while the height of the pattern projected from the breakout area arrives at a further downside target of 16065. A rebound in price to close above resistance at 17500 would consider the failure of the downside breakout.

Click here to view the Barclays Africa Group chart

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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IG provides an execution-only service. The material on this website does not contain (and should not be construed as containing) investment advice or an investment recommendation, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of the above information. Consequently any person acting on it does so entirely at his or her own risk. The research does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. This communication must not be reproduced or further distributed. The price levels provided are derived from ProRealtime Charts (IT-Finance)

South Africa 40 chart

Source:  ProRealTime charts, as of 01/09/2015

BHP Billiton vs Sasol

Source:  ProRealTime charts, as of 01/09/2015

Imperial Holdings Ltd

Source:  ProRealTime charts, as of 01/09/2015

Barclays Africa Group

Source:  ProRealTime charts, as of 01/09/2015

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