Technical Tuesday

10 March 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:

Naspers Ltd

MTN Group Ltd

Sasol Ltd

South Africa 40 index

Technical view

The South Africa 40 cash index has continued the consolidation over the last week but is now testing the support of this  range (46500). A close below this level would favour a move to the next level of support at 45925, a break of which would further favour 45100 as support.

The Stochastic has moved into oversold territory. Should a downside breakout of support at 46500 confirm, trend followers would look to accumulate at the lower levels of support rather than trade against the longer term uptrend which remains firmly intact.

Should the downside breakout not confirm and the price close above 46500, range traders may look for long entry with a view that the price may retest resistance at 47410.

Source: ProRealTime charts, as of 10/03/2015

Equities in focus

Naspers Ltd

The price of Naspers has consolidated into a triangle pattern after a strong rally. These patterns are usually considered continuation patterns as they allude to the continuation of the trend which preceded the rally. However, it is important to wait for directional confirmation with a breakout rather than pre-empting the direction it may occur.

For an upside breakout a price close above resistance at 173600 is needed, while a close below 162000 would consider a downside breakout. The height of the pattern projected (21300) would consider a directional move of equal magnitude in the same direction of the initial breakout.

While an upside breakout may provide a long opportunity, a downside breakout is against a strong long-term uptrend and trend followers may be better off waiting for the weakness to play out before getting involved.  

Source: ProRealTime charts, as of  10/03/2015

MTN Group Ltd

The price of MTN Group has broken out of an ascending triangle formation. The triangle consolidation has served as a reversal pattern from the preceding downtrend, with the height of the pattern projected arriving at an upside target of 23850.

The breakout of this consolidation finds increased validity as it has occurred on increased volume (circled red). A price close below gap support below 20950 would consider the failure of the bullish indications.

Source: ProRealTime charts, as of  10/03/2015

Sasol Ltd

Sasol has formed a falling wedge formation. The pattern highlights a slow move down relative to fast preceding move up, alluding to a bullish momentum for the share.

The Stochastic is in oversold territory, supporting the price as it suggests the move down has been overextended for the time being. The indications favour a move towards wedge resistance at 42600, which if broken further favours 45050 as the next resistance target.

A close below wedge support at 38900 would consider the failure of the bullish indications.

Source: ProRealTime charts, as of  10/03/2015

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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