Technical Tuesdays

4 November 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 Ltd

Anglo American PLC (SA)

Sappi Ltd

View market data

Company data

Dividends

Economic catalysts

South Africa 40 index

Technical view

The South Africa 40 cash index has realized the target from the double bottom reversal pattern and confirmed the validity of the inverse head and shoulders formation (Marked L,H & R). The upside target projected from the inverse head and shoulders formation is considered at 46500. 

The candles circled red, warn of a possible short-term pullback, which if occurs, considers short-term support between levels 43700 and 43925. Should this support area be broken it would consider the weakening of the current move upwards. The upside remains favoured, with 46500 the projected target, and should a short-term pullback occur it may afford long entry opportunity for breakout traders who missed the initial move.

 

Source: ProRealTime charts, as of 04/11/2014

Consolidations to watch

Sasol Ltd

The price of Sasol has formed a triangle consolidation pattern. This pattern highlights the lack of directional commitment in the short-term. These consolidations are generally considered continuation patterns as they have a habit of occurring before the continuation of the preceding trend, which in this scenario is down.

It is however prudent to wait for a breakout in either direction before considering the new directional commitment. For an upside breakout to occur, the price would need to close above the 56500 level, while a downside breakout is considered should the price close below 53900. When a breakout does occur, the height of the channel (4900) predicts move of equal proportion in the same direction of the breakout. 

Source: ProRealTime charts, as of  04/11/2014

Anglo American PLC (SA)

The price of Anglo American Plc looks to be reversing off support of a falling wedge. A falling wedge in a downtrend alludes to the loss of downward momentum and suggests a possible short-term rebound in price. At wedge support, the price has displayed a positive divergence with the Stochastic Oscillator as the indicator crosses out of oversold territory.

These indications are considered short-term bullish and favour a move towards initial resistance at 24050, which if broken further favours a move towards the 25375 level. A price close below wedge support at 22300 would consider the failure of these bullish indications. 

Source: ProRealTime charts, as of  04/11/2014

Breakout to watch

Sappi Ltd

The price of Sappi has formed a double bottom formation (Blue “W”). This pattern alludes to the reversal of the preceding downtrend, and is considered a bullish indication in technical analysis terms. A target is derived by measuring the height of the pattern and projecting an equal distance from the breakout level at 4320 (dotted blue lines) to arrive at 4600.

The price closing below 4180 would consider the failure of the bullish indication. The failure level is considered as half the distance of the projected target, subtracted from the breakout level price. 

Source: ProRealTime charts, as of  04/11/2014

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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