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WITH THE December retail month behind us, we look at the charts of two retail stocks. The first is Mr Price, whose share price has been one of the leaders in the currently strong retail sector of the JSE. The other stock is JD Group, a relative laggard in that sector. Mr Price has broken out above an important resistance level and is pointing to more upside to come. Likewise for JD Group - that is, playing "catch up" and it has a bullish chart over the medium term.
MR PRICE - UPSIDE BREAKOUT
Trend: Up on all major timeframes.
Strategy: Buy on a pullback to R25 or lower.
* There are a number of positives on Mr Price's chart. It's broken out of two patterns to upside. They are: a broadening formation (lines 1 and 2) and a symmetrical triangle (line 3 and part of line 2).
* In addition, it's one of the few stocks trading above its 200-day moving average (and quite significantly so at that).
* The only caveat is that its short-term stochastic oscillator (on top) is relatively overbought. A short-term pullback is therefore expected (for buying).
* Traders and investors buy on a pullback towards lines 2 and/or 3. (Line 2 is at R25, while line 3 is at R24).
* With regard to targets, target 1 is R30,50 - ie, the height of triangle 2-3 projected up. And target 2 (more medium term) is at R35,70 (the height of pattern 1-2 projected up).
* Place your initial stop-loss as a closing price below R23,80.
JD GROUP - HIGHER TARGET
Trend: Short- and medium term up. Long term sideways to down.
Strategy: Buy on a pullback to line 1 or lower.
* It's formed a "double bottom" (as labelled) and has a higher target in place over the medium term. It's also trading above its 200-day moving average.
* However, the daily stochastic oscillator is overbought. That points to a short-term correction to come before more upside.
* Therefore, both traders and investors look to buy it on a pullback to line 1 (R34,60) or lower. Further support is line 2, at the R32,20 level.
* The upside target is R53,50, measured as the height of the double bottom pattern projected up.
* Place your stop-loss as a closing price below line 2 support (ie, below R32). Lock in partial profits at R44, more at the R53,50 target and hold a portion for a potential run-up to above R60.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.