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Having not looked at small caps in this column for some time, we’re showing charts of two bullish-looking small cap companies on the JSE. The first is (formerly beleaguered) financial company Blue Financial Services [JSE:BFS] (code: BFS). Its share price is in the process of recovering after a meltdown. The other is Zeder Investments [JSE:ZED] (ZED), also in the financial sector. It’s been a steady performer and has a higher price target in place.
BFS – IMPORTANT BREAKOUT
Trend: Medium term up. Long term sideways, but rapidly improving.
Strategy: Buy on a pullback.
* Having collapsed from a high of R7 in 2008, Blue dropped to below 10c/share last year. It’s been steadily climbing since and recently broke out above line 1 – the “neckline” – of a large inverse head and shoulders pattern (as labelled). It’s also trading at its highest price over the past 18 months. Its recovery is truly under way.
* The weekly stochastic oscillator (on top) is becoming overbought, but pullbacks are to be bought.
* Buy it on a pullback to the 37c to 33c range. (At the time of writing it was trading at 50c.) You can buy some at current levels to get a line in, but buy the bulk of the position if/when it pulls back.
* Its minimum upside target is R1,34 – ie, the height of the inverse head and shoulders projected up. That’s a medium/long-term target.
* Initial stop-loss is a weekly (ie, Friday) close below 26c. Note: When the price gets to 75c, lock in partial profits to reduce your overall risk.
ZEDER – HIGHER TARGET
Trend: Medium term sideways. Long term up.
Strategy: Buy.
* Zeder has been a good and steady performer since 2009, doubling its share price since then. It’s making its way up to its all-time high (line 3) at 300c. (At the time of writing it was trading at 250c.)
* It’s formed a symmetrical triangle (lines 1 and 2). It recently broke out above line 2 but has since moved back inside the triangle. Nevertheless, the price pattern still looks bullish.
* Its daily stochastic is moving back into its oversold region, which typically means a rally to occur soon. Therefore, any pullback is likely to be temporary.
* Buy it at current levels (250c) for the short/medium term. If it pulls back closer to line 1 (242c), so much the better (for buying).
* It’s technically pointing to a target of 308c – ie, the height of the triangle projected up. But because there’s a lot of resistance at line 3 (300c) take profits there.
* The stop-loss is a close below 239c. (see page 42)
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
BFS – IMPORTANT BREAKOUT
Trend: Medium term up. Long term sideways, but rapidly improving.
Strategy: Buy on a pullback.
* Having collapsed from a high of R7 in 2008, Blue dropped to below 10c/share last year. It’s been steadily climbing since and recently broke out above line 1 – the “neckline” – of a large inverse head and shoulders pattern (as labelled). It’s also trading at its highest price over the past 18 months. Its recovery is truly under way.
* The weekly stochastic oscillator (on top) is becoming overbought, but pullbacks are to be bought.
* Buy it on a pullback to the 37c to 33c range. (At the time of writing it was trading at 50c.) You can buy some at current levels to get a line in, but buy the bulk of the position if/when it pulls back.
* Its minimum upside target is R1,34 – ie, the height of the inverse head and shoulders projected up. That’s a medium/long-term target.
* Initial stop-loss is a weekly (ie, Friday) close below 26c. Note: When the price gets to 75c, lock in partial profits to reduce your overall risk.
ZEDER – HIGHER TARGET
Trend: Medium term sideways. Long term up.
Strategy: Buy.
* Zeder has been a good and steady performer since 2009, doubling its share price since then. It’s making its way up to its all-time high (line 3) at 300c. (At the time of writing it was trading at 250c.)
* It’s formed a symmetrical triangle (lines 1 and 2). It recently broke out above line 2 but has since moved back inside the triangle. Nevertheless, the price pattern still looks bullish.
* Its daily stochastic is moving back into its oversold region, which typically means a rally to occur soon. Therefore, any pullback is likely to be temporary.
* Buy it at current levels (250c) for the short/medium term. If it pulls back closer to line 1 (242c), so much the better (for buying).
* It’s technically pointing to a target of 308c – ie, the height of the triangle projected up. But because there’s a lot of resistance at line 3 (300c) take profits there.
* The stop-loss is a close below 239c. (see page 42)
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
