Technical Tuesday

5 May 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:

Sasol Ltd

Mr Price Group Ltd

BHP Billiton PLC (SA)

South Africa 40 index

Technical view

Last week’s negative divergence signal  did well in predicting the short-term decline to our guided support level at 47980. The price did form a bullish engulfing (circled blue) off 47980 alluding to the end of the pullback and a possible bullish move to follow.

The anticipated bullish move to follow has however been weak and failed to gain real impetus. With this in mind a short-term price consolidation is considered between levels 47980 and 49298. The long-term trend remains firmly up and therefore a long bias remains favoured.

Range traders might look for long entry at 47980 with a close below 47410 as a failure level. Breakout traders would look for a close above all-time high resistance at 49298 for a move towards the weekly charts upside target at 49840.

 

Source: ProRealTime charts, as of 05/05/2015

Equities in focus

Sasol Ltd

The price of Sasol looks to be reversing (circled blue) off gap resistance at 49800. A sharp volume spike while the price was at resistance suggests a strategic distribution of shares at this level. The Stochastic is displaying a negative divergence with the price and is starting to move out of overbought territory.

These are bearish indications and a move towards support at 45900 is the initial target, a break of which further favours 42450 as the next support level. A close above 51450 would consider the failure of the bearish indications. 

Source: ProRealTime charts, as of 05/05/2015

Mr Price Group Ltd

Following its recent decline from an all-time high, Mr Price now looks to be forming a bullish divergence with the stochastic oscillator, which has also crossed through its signal line in oversold territory.

The extremely high volume (circled) red suggests a selling climax alluding to possible accumulation at this level. These indications are considered short-term bullish in technical analysis and a retest of resistance at 26740 is favoured in the near term, while a close below 24200 would consider the failure thereof. 

Source:  ProRealTime charts, as of  05/05/2015

BHP Billiton PLC (SA)

The price of BHP Billiton is trading at resistance (29600) whilst in overbought territory, which suggests that traders with a bullish bias might be afforded the opportunity to accumulate at a slightly better level than is current.

Range traders might look to accumulate near support at 25450 targeting a rebound back towards current resistance at 29600. Breakout traders might wait for a close above resistance at 29600 anticipating a move towards the next resistance level at 33450.

Trend supersedes the overbought signal and in turn, a breakout would assume the resumption of trend thereby holding less relevance to the cyclical indication. Pending shareholder approval and the possible unbundling of the new South32 operations, the technical view provides a shorter-term expectation, which precedes the event.nt. 

Source:  ProRealTime charts, as of  05/04/2015

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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