Technical Analysis

06 August 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, spot gold and the following equities:

Nedbank Group Ltd

Netcare Ltd

View market data

Company data


Economic catalysts

South Africa 40 index

Technical view

The South Africa 40 cash index has confirmed a downside breakout of our triangle formation and traded through the initial target at 45600 before rebounding to test resistance at 46200.

The pattern break is acting as a near term reversal pattern and favours further downside with the recent low at 45440 providing the initial downside target. Should the price break this support level, the height of the triangle projected from the breakout level arrives at a further downside target of 44665.

The long term trend does still remain up and trading short does carry a high degree of risk as it is a contrarian view.

Conservative traders trading the triangle formation as a reversal pattern might use a close above the 46200 as an indication of the failure thereof, while those contrarian traders with a higher risk appetite might use triangle resistance at 47000 as broader indication of failure.

Source: ProRealTime charts, as of 05/08/2014

Equities in focus

Nedbank Group Ltd

The price of Nedbank has broken out of a triangle consolidation and returned to retest the breakout level.

The price now looks to be resuming the preceding uptrend with initial resistance favoured at 24550.

A break of this further favours a move to 25350. This level is derived by measuring the height of the pattern and projecting a proportionate distance from the breakout level (dotted black lines).

The price trading below the triangles support level at 22700 would indicate the failure of the bullish indication. 

Source: ProRealTime charts, as of  05/08/2014

Netcare Ltd 

The price of Netcare has formed a triangle consolidation.

These patterns are generally considered continuation patterns as they have a habit of occurring before the continuation of the preceding trend, which in this situation is up.

It is however prudent to wait for a breakout to occur rather than pre-empting the direction. When a breakout does occur we measure the height of the pattern (95c) and project the same distance from the breakout area to arrive at a proportionate directional target.

For a downside breakout to occur the price would need to close below triangle support at 3015, while for an upside breakout the price would need to close above triangle resistance at 3125.

Source: ProRealTime charts, as of  05/08/2014

Spot Gold

The price of spot gold has formed a falling wedge chart pattern (shaded area).

The pattern suggests a weak move down after a strong move up alluding to the price momentum remaining positive. The Stochastic oscillator is moving out of oversold territory and displaying a positive divergence (dotted blue lines on price and indicator) supporting the price action. These considerations are bullish favouring near term upside.

The initial wedge resistance target is located at 1308, which if broken further favours a move towards 1322. The price closing below wedge support at 1275 would consider the bullish indications to have failed.

Source: ProRealTime charts, as of  05/08/2014

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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