Technical Tuesday
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The outlook for the South Africa 40 Cash Index, Gold, Oil and the Rand
Breakout, trend following and pair trading opportunities on local and international shares
Entry levels, target prices and failure levels
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Contact us: 010 500 8624
Call 010 500 8624 or email newaccounts.za@ig.com to talk about opening a trading account. We're here 24 hours a day from 9am Saturday to 11pm Friday.
Contact us: 010 500 8624
26 March 2024
In the report this week, we look at the following markets:
- South Africa 40 Cash Index
- USD/ZAR
- Spot Gold
- Brent Crude Oil
- Standard Bank vs Sanlam
South Africa 40 Cash Index
While having reached our initial downside support target of 655570, the South Africa 40 Cash Index has failed to extend losses and test the next target of 655040.
Circled red we have a bullish price reversal off the 65570 level. The price has since started to move back towards range resistance at 67940.
Recent price reversals confirm 65570 (support) and 67940 (resistance) as the relevant trading range for the index at present.
When a rangebound price environment is prevalent, as is the case on the South Africa 40 Cash Index right now, our preference is to look to trade between the levels of the range or wait for a breakout of the range.
New short positions might be considered on a bearish price reversal around either the 67940 or 68515 resistance levels.
New long positions might be preferred should a bearish price reversal not confirm, and instead we see a bullish break of the 68515-resistance level.
Should one of these trading scenarios present themselves we will update guidance accordingly with targets and failure levels.
USD/ZAR
The weekly chart of the USD/ZAR highlights the consolidatory phase prevalent for the currency pair right now. The consolidation has taken the shape of a triangle formation.
A triangle consolidation suggests that the preceding uptrend could be setting up to continue i.e. dollar strength / rand weakness.
For the pattern to become relevant, a break of resistance is needed. This resistance appears to be at the 19.40 level. A weekly close above this level would suggest longer term gains with 19.90 the initial upside target. A move above this level would see a further target projected at around 21.70.
Should the price instead move to break triangle support and trade below the low at 18.20, the pattern would be deemed to have failed and no longer carry relevance.
Spot Gold
The price of gold broke out of the bullish wedge formation highlighted last week and has traded through the 2195 resistance target, reaching a new high at 2225. The new high re confirms the longer-term uptrend in place for gold.
Breakout traders might consider the recent pullback as a second opportunity for long entry, targeting a move towards the recent high at 2225, while using a close below the 2145 as a stop loss consideration for the setup.
Brent Crude Oil
The price of brent crude has now established a new short-term range between levels 84.20 (support) and 86.50 (resistance). The price is now moving to test resistance of this range once again.
For short entry traders might hope to see a bearish reversal off resistance, before targeting a move back towards 84.20, using a close above the reversal high (should this scenario manifest) as a failure indication.
For long entry, traders might hope to instead see either a break (close above) of resistance at 86.50, or a bullish price reversal close towards the 84.20 support level. In the breakout scenario a close below the mid-point of the current range could be used as a failure level, while in the bullish reversal scenario, a close below the reversal low could be used as the failure level.
Standard Bank vs Sanlam
The pair considers a Long Standard Bank position against a Short Sanlam position. The net result of these combined trades looks for an 5.2% profit margin. A stop loss is considered of equal proportion to the expected gain.
A successful pair trade can be realized 1 of 3 ways:
1. The long position rises while the short position falls
2. The long position rises faster than the short position rises
3. The short position falls faster than the long position falls.
The blue line on the chart represents the Standard Bank / Sanlam ratio which recently traded more than 2 standard deviations below the mean (middle line). A successful trade would require the ratio (blue line) to return to the mean to meet the guided profit target.
Get full report
For the full report, which adds trade opportunities on local and international shares, click the link below
Get full report
For the full report, which adds trade opportunities on local and international shares, click the link below
Shaun Murison
Our weekly technical report is compiled by in-house senior market analyst, Shaun Murison.
Shaun has worked in financial markets for over ten years. As market analyst, he presents our CFD trading seminars around the country. In addition, Shaun is a regular commentator on the local financial markets, contributing to various media (such as CNBC Africa and Business Day) and writing daily and weekly market reports. He is a registered person at the JSE as well as a Certified Financial Technician (CFTE). You can follow Shaun on Twitter at @ShaunMurison_IG for regular market updates and insight.
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