Technical Tuesdays

29 July 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:

Cie Financiere Richemont (SA)

RMI Holdings

Clicks Group Ltd

Barclays Africa Group

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Company data

Dividends

Economic catalysts

South Africa 40 index

Technical view

The South Africa 40 cash index produced a false break of the lower channel support (dotted red line) and triangle pattern. The lower channel line has now been moved to accommodate the false breakout. In congruence with the lower channel trend line, the new downside breakout level has been raised to 46200.

The long-term trend remains up and a long bias remains favoured among trend followers. The price has now experienced a upside breakout of the triangle formation. As guided to last week, the close proximity of all-time high resistance at 47160 provides the true breakout level considered rather than the triangle resistance. A close above this high favours further upside with channel resistance providing a near-term target at 48000.

Should a downside breakout occur below the 46200 level, a wait and see approach is preferred to trading against the long-term uptrend. Only if the price starts trading below the significant low at 45600 will a trend reversal or near-term downtrend be considered.

 

Source: ProRealTime charts, as of 29/07/2014

Equities in focus

Cie Financiere Richemont

The price of Richemont has reversed off historical support at 10100. The Stochastic oscillator is moving out of oversold territory supporting the price action.

Strong volume has accompanied the reversal suggesting investor enthusiasm at this level. These considerations are bullish favouring a further rebound in the price.

The initial resistance target is located at 10700, which if broken further favours a move towards 10950. The price closing below trend line support at 10100 would indicate failure of the bullish indications.

Source: ProRealTime charts, as of  29/07/2014

RMI Holdings 

The price of RMI Holdings has formed a falling wedge chart pattern (red lines) as well as a bullish engulfing candle pattern (circled blue). The Stochastic oscillator is moving out of oversold territory supporting the price action.

Strong volume (circled red) has accompanied the reversal suggesting investor enthusiasm at this level. These considerations are bullish favouring a continuation of the preceding uptrend.

The initial wedge resistance target is located at 3310, which if broken further favours a move towards 3390. The price closing below the low of the bullish engulfing reversal pattern at 3140 would indicate failure of the bullish indications.

Source: ProRealTime charts, as of  29/07/2014

Clicks Group Ltd

The price of Clicks Group has formed a triangle consolidation. These patterns are generally considered continuation patterns as they have a habit of occurring before the continuation of the preceding trend, which in this situation is up.

However it is prudent to wait for a breakout to occur rather than to pre-empt the direction. When a breakout does occur we measure the height of the pattern (360), and project the same distance from the breakout area to arrive at a proportionate directional target.

For a downside breakout to occur the price would need to close below triangle support at 6600, while for an upside breakout the price would need to close above triangle resistance at 6780. Should a breakout occur in either direction, failure would be considered should the price pullback half the height of the consolidation (180).

Source: ProRealTime charts, as of  29/07/2014

Barclays Africa Group Ltd

The share price of Barclays Africa Group has broken out of a short-term consolidation and is now continuing the preceding uptrend. The price is however approaching resistance at 17150 and has entered into overbought territory.

This would caution the potential of a near-term retracement before further gains are realised in line with the long-term uptrend.  

Barclays is expected to release interim results tomorrow. The group expects earnings growth of between 8% and 11%, can you bank on Barclays? read the  full article.

Source: ProRealTime charts, as of  28/07/2014

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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