Technical Tuesday

USD/ZAR

The upside breakout scenario from our previous note has come to fruition with the price of the USD/ZAR currency pair closing above the 19.10 resistance level. There has been an initial spike to the 19.40 target, followed by a quick pullback.

The USD/ZAR is now continuing its near-term uptrend, and the 19.30 to 19.40 range again provides our upside resistance targets from the move. Traders who are long might consider trailing their respective stops to a close below a one day low.

Spot Gold

The price of gold has started to correct from oversold territory and is currently testing a break of trend line support. The longer-term uptrend is still considered up as no major lows have been broken.

Traders respecting the longer-term uptrend might prefer to wait out weakness, before looking for a bullish price reversal for long entry once again. Long entry might be considered on a bullish price reversal close to one of the labelled support levels at 2265, 2225 or 2200 respectively.

Brent Crude Oil

The price of brent crude has now corrected from overbought territory and after finding resistance at the 91.30 level.

The longer-term trend remains up despite the near-term correction. The price has started to form an intraday price reversal just below the 86.80 level. A more convincing bullish reversal would be considered if we can see the price closing back above the 86.80 level. In this scenario, 88.90 provides the initial upside resistance target, while a close below the recent low at 85.25 would instead suggest the move to have failed.

Sanlam vs Momentum Metropolitan Holdings

The pair considers a Long Sanlam position against a Short Momentum Metropolitan position. The net result of these combined trades looks for an 6.7% profit margin. A stop loss is considered of equal proportion to the expected gain.

A successful pair trade can be realized 1 of 3 ways:
1. The long position rises while the short position falls
2. The long position rises faster than the short position rises
3. The short position falls faster than the long position falls.

The blue line on the chart represents the Sanlam / Momentum Metropolitan Holdings ratio which recently traded more than 2 standard deviations below the mean (middle line). A successful trade would require the ratio (blue line) to return to the mean to meet the guided profit target.