Technical Tuesdays

18 February 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:

MMI Holdings Ltd

Nedbank Group Ltd

Telkom SA SOC Limited

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Company data

Dividends

Economic catalysts

South Africa 40 index

Technical view

The SA40 index moved towards the favoured target at 42600 and is now finding resistance.

The small red arrow highlights a “Doji” candle intraday, which marks a point of indecision. At this point of indecision and resistance, the Stochastic oscillator is crossing its trigger line in overbought territory. In summation, these indications are considered short-term bearish but are against the prevailing short and long-term trends which are up.

With the aforementioned in mind, should weakness occur in the near-term, trend followers would wait for entry in line with the prevailing uptrend considering levels of support as opportunity.

Alternatively should resistance at 42600 be broken, a move towards the upper trend line of the broadening formation at 43325 is favoured.

Source: ProRealTime charts, as of 18/02/2014

Equity in focus

MMI Holdings Ltd

The price of MMI Holdings has formed a rising wedge (red lines) in the near-term downtrend.

The pattern highlights a slow cumbersome move up after an aggressive move down, suggesting that momentum remains down. The declining volume (blue arrow) on the price rebound shows a lack of enthusiasm on the buy side, supporting the bearish price indication.

The support from the wedge provides a favoured target at 2315, a break of which anticipates the next support level at the recent low 2280. Should the price close above resistance at 2500, the bearish indications would be deemed to have failed.

Source: ProRealTime charts, as of 18/02/2014

Nedbank Group Ltd

The price of Nedbank has formed a bear flag (parallel black lines) in the near-term downtrend.

The pattern highlights a slow cumbersome move up after an aggressive move down, suggesting that the momentum remains down. The declining volume (blue arrow) on the price rebound shows a lack of enthusiasm on the buy side, supporting the bearish price indication. For the bear flag to trigger an action, the price would need to break below the 19750 support in which case the support level at 19000 would be favoured.

Should the 19000 level be breached, 18750 would be the next anticipated support target. The price closing above our downward trend line at 20550 would indicate failure of the aforementioned bearish indications.

Source: ProRealTime charts, as of 18/02/2014

Telkom SA SOC Limited

The price of Telkom looks to be reversing its recent short-term decline near support at 2880.

The Stochastic has recently moved out of oversold territory and is displaying a positive divergence (dotted blue lines) with the price. Positive divergence occurs when the lows of an indicator fail to confirm the lows of the price, this is considered short-term bullish in technical analysis terms.

Swing traders will often buy into the first pullback from a recent high as is the case with Telkom. In this situation a move towards resistance at 3250 is favoured, while the price closing below 2880 would consider failure of the aforementioned bullish indications.

Source: ProRealTime charts, as of 18/02/2014

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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