Technical Tuesdays

28 October 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:

Remgro Ltd

MMI Holdings

Northam Platinum Ltd

View market data

Company data

Dividends

Economic catalysts

South Africa 40 index

Technical view

The South Africa 40 cash Index has moved closer to last week’s projected target (44000) from the double bottom reversal pattern (blue “W”). The 44000 levels remains the favoured target although initial resistance is considered at 43750 (recent turning point).

Should the price manage to close above the 43750 level a larger reversal pattern in the form of an inverse head and shoulders (labelled L, H &R) becomes relevant.

Should this occur the pattern would predict significant upside (more than 2000 points). Failure of both the double bottom and possible inverse head and shoulders formations would be considered should the price close below the 42150 level (or 42640 on a line graph).

Source: ProRealTime charts, as of 28/10/2014

Equities in focus

Remgro Ltd

The price of Remgro has formed an inverse head and shoulders formation. This pattern alludes to the reversal of the preceding downtrend and is considered a bullish indication in technical analysis terms. The recent high at 25600 is the resistance target favoured, which if broken, a move towards the projected target from the pattern is considered at 26100.

Conservative breakout traders might wait for a pullback towards 23850 for long entry, while the price closing below support at 22800 would consider the failure of the bullish indication.

Source: ProRealTime charts, as of  28/10/2014

MMI Holdings Ltd

The price of MMI Holdings Ltd has formed an inverse head and shoulders formation. This pattern alludes to the reversal of the preceding downtrend and is considered a bullish indication in technical analysis terms. The height of the pattern projected from the breakout level (dotted red lines) arrives at an upside target of 2860. Conservative breakout traders might wait for a pullback towards 2685 for long entry. The close proximity of the right shoulder labelled “R” considers a close below the 200MA (2580) as perhaps a better level for an indication of failure, allowing the technical setup a little more breathing room.

Source: ProRealTime charts, as of  28/10/2014

Northam Platinum Ltd

The price of Northam Platinum Ltd looks to reversing off support of a falling wedge. A falling wedge in a downtrend alludes to the loss of downward momentum and suggests a short term rebound in price. At wedge support, the price is displaying a positive divergence with the Stochastic oscillator as the indicator crosses out of oversold territory. At these lower levels we have also seen a surge in volume suggesting a capitulation into weakness.

These indications are considered short term bullish and favour a move towards initial resistance at 3540, which if broken further favours a move towards the 3630 level. A price close below wedge support at 3140 would consider the failure of these bullish indications.

Source: ProRealTime charts, as of  28/10/2014

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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