Technical Tuesday

21 April 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:

MTN Group Ltd

Sibanye Gold Ltd

Johnson & Johnson Ltd

South Africa 40 index

Technical view

The South Africa 40 cash index confirmed a breakout of the 47410 resistance, although has not yet succeeded in reaching the trend line resistance target alluded to last week. The price looks to be in a short term consolidation at present as it pauses from the recent run up.

The Stochastic is in overbought territory, although this is not a signal to trade against the long term uptrend. In an uptrend, overbought signals can persist for quite some time and are perhaps more reliable a signal for exiting a long trade rather than trading counter trend. Trend remains more relevant than the momentum indication and the trendline resistance target has been revised up to 48500.

Aggressive long entry would consider the 47410 level perhaps providing leeway to 47400. A more conservative trading approach may be to wait for overbought conditions to subside  which can occur if the price continues to consolidate sideways.

Should weakness start to play out long entry might also be considered at 46700 support with the initial target a retest of 47410 resistance. A close below trendline support at 46300 would be considered as a failure level for the above.

Source: ProRealTime charts, as of 21/04/2015

Equities in focus

MTN Group Limited

After forming a broad consolidation (red rectangle) between levels 19775 and 22200, MTN looks to have broken out of this range in an attempt to reverse the downtrend which preceded the consolidation.  

The price has started to pullback marginally since the upside breakout occurred. The pullback, consisting of the last three days decline has failed to erase the gain on of the one breakout day, alluding to the momentum as remaining bullish.

23450 is the initial upside target favoured, while a close below support at 21800 would consider the failure thereof. 

Source: ProRealTime charts, as of 21/04/2015

Sibanye Gold Ltd

Sibanye Gold has broken out of a double bottom reversal pattern. The pattern suggests that the preceding downtrend is now starting to “reverse” into a new uptrend. The height of the pattern projected from the breakout level arrives at a proportional upside target of 3110. A close below trendline support at 2730 would consider the failure of the bullish indication.

Source: ProRealTime charts, as of  21/04/2015

Johnson & Johnson

After a longer term uptrend (blue arrow), Johnson & Johnson has pulled back from its recent high to trade within a range bound price environment in both the short and medium terms.

The preceding uptrend suggest short term traders may prefer a long bias to their trades. The short term range is highlighted with the red box between levels 9845 and 10330. Range traders might look to accumulate at support (9845) targeting a move towards resistance (10330) for an exit. Breakout traders would look for a close above 10330 before targeting a move back to the recent high at 10920.

Should the price start trading below support at 9680, this may be considered bearish in that the longer term uptrend could be starting to reverse.

Source: ProRealTime charts, as of  21/04/2015

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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