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Trade insight example

14 October 2014 

Today we look at two stocks showing head and shoulder patterns, which seems to be evident in a number of stocks lately.

Firstrand Ltd

The pattern consists of a left shoulder, a head, and a right shoulder and a line drawn as the neckline. Confirmation of the pattern was a break of the neckline support (4330c) and the projected price decline is found by measuring the distance from the neckline to the top of the head (4693c). The projected target is 3954c. We are starting to see a reversal on the stochastic oscillators which could see the buyers enter the market. Watch the 200 day moving average which could also offer support to further weakness.

Firstrand Ltd, 13/10/2014

Remgro Ltd

Similar to the Firstrand chart, a head and shoulders pattern will usually occur following an upward trend which is evident in both charts. The neckline was broken on Friday confirming the pattern. Projected target is 20215. It is important to use the price target as a guide and take into consideration other factors like oscillators, earlier resistance/support levels or key moving averages. Caution as oscillators are in a bullish territory and share might bounce off the 200 day moving average support. The price closing above the right shoulder at 23880c (labelled R) would consider the head and shoulders formation to have failed. - Travis Robson, Head of Premium Client Management

Remgro Ltd, 13/10/2014

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