Technical Tuesdays

27 January 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:

AngloGold Ashanti Ltd

Investec PLC (SA)

EOH Holdings Ltd

South Africa 40 index

Technical view

The South Africa 40 cash index has managed to hold onto short-term gains over the last week to trade through both resistance levels charted at 43800 and 44550. The price has found resistance on the 200MA (the long-term gauge of trend used), but now trades firmly above the 20MA and 50MA (the short and medium-term gauges of trend used).

With this in mind, it is considered that the long-term directional trend remains undecided while the short to medium-term trends shift towards an upward bias. The red and green arrows on the chart mark significant higher highs and higher lows in the short to medium-term validating the view that these trends are shifting towards the positive.

In line with this trend bias, further upside is favoured with the next level of resistance anticipated at 45350. A close above this level could open up the possibility for significant further upside towards the 46500 level. Should the near-term upside fail and the price start trading below 43200 the trend bias in the short to medium-term would once again be considere non-directional.

Source: ProRealTime charts, as of 27/01/2015

Equities in focus

AngloGold Ashanti Ltd

The price of AngloGold Ashanti has formed and validated a double bottom reversal pattern marked with the blue “W” on the chart. This pattern suggests that the preceding downtrend has now reversed into an uptrend.

Since rallying from its lows in December 2014 the price has experienced its first significant retrace. Circled blue we have a bullish candle formation suggesting that the retracement has now ended. The short-term high at 13900 is the initial target favoured which if broken considers the projected target from the height of the pattern (dotted red lines) at 14600.

Conservative pattern traders may consider a close below initial gap support at 11600 as failure of the bullish indications, while pattern traders with an increased appetite for risk may consider a close below the lower level of gap support at 11340 as an indication of failure.

Source: ProRealTime charts, as of  27/01/2015

Investec PLC (SA)

The price of Investec Plc has formed and is validating a double bottom reversal pattern marked with the blue “W” on the chart. This pattern suggests that the short-term preceding downtrend is now reversing into an uptrend. Should the price manage to close above 9890 the pattern is said to be “in play”.

In this scenario, the previous high at 10440 becomes the favoured resistance target, a break of which further favours the projected target from the height of the pattern (dotted black lines) at 10620. A price close below 9575 would consider the failure of the short-term bullish indication.

Source: ProRealTime charts, as of  27/01/2015

EOH Holdings Ltd

The price of EOH Holdings has broken out of a symmetrical triangle formation with technical indicators Bollinger bands and volume validating the breakout. Bollinger bands expand on an increase in price volatility and a price close above the upper Bollinger (while expanding) is often used as a confirmation of a breakout.

This technique is said should help in distinguishing when the price is committing to a directional bias rather than expanding the range bound trading environment. High volume on a price breakout alludes to the sustainability in the directional move and is circled red on the EOH price chart. Furthermore the breakout is in-line with the long-term trend as gauged by the price in relation to 200 day simple moving average, favouring traders with a trend following bias.

The price is now experiencing its first pullback since the initial breakout, which affords technical breakout traders of these types of patterns, a second opportunity for long entry. The height of the triangle consolidation projected from the breakout level (11475) arrives at an upside target of 12775. A price close below support at 11240 would consider the failure of the bullish indications. 

Source: ProRealTime charts, as of  27/01/2015

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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