Technical Tuesdays

15 April 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:

Aspen Pharmcare Holdings

SABMiller PLC

Sappi Ltd

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Company data

Dividends

Economic catalysts

South Africa 40 index

Technical view

As mentioned last week the South Africa 40 index has formed a large rising wedge formation, which warns of the potential for downside as the trend loses its momentum and starts to creep.

In the near-term, there is a trading range between levels 42800 and 43640. Short-term range traders would be looking to accumulate near the support and distribute near resistance, with a break above or below these levels as a signal to exit. Breakout traders would be waiting for a break of support or resistance as an opportunity to enter in the same direction as the breakout, with the height of the range (840 points) as a projected directional target.

The long term-trend remains up (price firmly above 200MA), although the price activity over the last 4 months (rising wedge) warns of a possible retracement. It is with this reason that long or short trades are considered relative to the breakout, and range trade opportunities alluded to above.

Source: ProRealTime charts, as of 15/04/2014

Equity in focus

Aspen

The price of Aspen has broken out of a descending triangle formation. The pattern appears to be acting as a reversal of the preceding uptrend. The height of the pattern projected from the downside breakout level (27350) arrives at a further downside target at 25930.

Aggressive breakout traders would have entered short on the initial breakout, while conservative breakout traders would be looking for a short entry as close to the 27350 level as possible on a price pullback, which appears to be happening currently.

Should the price close above the upper trend line of the triangle formation (27700), the negative indications would be deemed to have failed. 

Source: ProRealTime charts, as of 15/04/2014

SABMiller

The price of SABMiller has been trading in a non-directional, sideways movement for the last six months.

In the near–term, there was a false breakout of the previous closing high at 54900. The price has ultimately found resistance off this level and has started to retrace. The stochastic oscillator is supporting the bearish price action as it moves out of overbought territory. The recent rally to the high has occurred on low volume which is also considered bearish in technical analysis terms.

With the above considerations in mind the previous support level at 52600 is favoured, a break of which favours further weakness towards the 50400 level. Should the price close above the 55100 level, it would deem the bearish indications to have failed.

Source: ProRealTime charts, as of 15/04/2014

Sappi Ltd

The price of Sappi has formed a double-top formation which is marked with the blue “M”. The pattern is considered a reversal pattern, as it warns of the preceding uptrend reversing into a near-term down trend. Should the price close below the 3400 support level, as it is trading intraday, the pattern would be said to have triggered.

Should this situation occur, a downside target is favoured at 3060. The target is derived by projecting a distance proportionate to the height of the pattern from the breakout level. If the price closes above resistance at 3500, the aforementioned considerations would be deemed to have failed.

Source: ProRealTime charts, as of 15/04/2014

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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