Telkom SA Ltd
The price Telkom has formed an ascending triangle formation in a long-term uptrend. These patterns are often referred to as continuation patterns, as they have a habit of occurring before the preceding trend is continued. It is however prudent to wait for a breakout in either direction rather than preempting that direction.
An upside breakout is considered should the price close above 7100, while a downside breakout is considered should the price close below 6340. A directional move proportional to the height of the pattern (850c) is expected with triangle formations when a breakout does occur. Breakout traders may prefer an upside breakout as an opportunity for long entry as it’s in line with the long-term uptrend.
A downside breakout is expected to carry a higher degree of risk for short entries, as it is against the uptrend and trend followers may wait for the weakness to play out before considering long entry into the share. The volume bars on the chart show a period of low trader/investor participation at this point, which is typical of short-term consolidations such as this one.
Breakout traders may use a significant increase in volume to confirm a true breakout of the consolidation when it does occur. In an upside breakout scenario failure would be considered should the price close below 6340.