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We look at an interesting chart of the rand against the euro. This currency pair is in a large consolidation pattern and will experience a breakout soon. The breakout can go either way, but the probabilities are increasingly favouring the rand to weaken against the euro. We also look at a chart of currently out of favour Top 40 stock Tiger Brands [JSE:TBS]. After falling over recent months it looks ready to rally again.
EURO/RAND – A BREAKOUT
Trend: Sideways.
Strategy: Wait for the new breakout direction.
* The euro/rand is in a large broadening formation (lines 1 and 2). It’s currently consolidating just below line 2, which is typically a bullish sign. It’s also moved above its 200-day moving average (MA) and is holding there (bullish).
* But the price is currently forming a “potential” double top (over the past two months). A close below line 3 – and specifically below its 200-day MA – will be bullish for the rand.
* Enter in the direction of the new breakout: ie, if it closes above line 2 (9,94) go long the euro/rand (ie, short the rand). But a close below its 200-day MA (9,4575) will be a short signal on the euro/rand (long signal on the rand). Do whichever happens first.
* The target for an upside break above line 2 will set up a move to 11,30: ie, the height of pattern 1-2 projected up. But a close below its 200-day MA will set up a move to 9,10.
* For a breakout above line 2 the stop will be a close below 9,65. For a short signal on the euro the stop is a close above 9,70.
TIGER BRANDS – UPSIDE
Trend: Short and long term sideways. Medium term technically down.
Strategy: Buy.
* Tiger Brands has been in a falling channel (lines 2 and 3) over recent months and is now breaking to above line 3 of the channel. It’s testing its falling 50-day MA (resistance) but is likely to continue up, because it now has a higher target.
* The daily stochastic oscillator (on top) isn’t yet overbought (which is bullish). Note how it gave a positive divergence (as labelled) to forewarn of the current rally.
* Buy it at current levels: it was trading at R180,68 at the time of writing.
* Its minimum upside target is to R189,20, measured as the height of the channel projected up. Take half profits there but leave some on for further upside potential to R195.
* The initial stop-loss is a close below R172. Once it gets to R189,20 raise your stop to a breaking of its prior three-day low.
* Note: Line 1 is long-term support at R168. If it does happen to fall to that before rallying significantly then buy off/near line 1. The stop will be a close below R168.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
EURO/RAND – A BREAKOUT
Trend: Sideways.
Strategy: Wait for the new breakout direction.
* The euro/rand is in a large broadening formation (lines 1 and 2). It’s currently consolidating just below line 2, which is typically a bullish sign. It’s also moved above its 200-day moving average (MA) and is holding there (bullish).
* But the price is currently forming a “potential” double top (over the past two months). A close below line 3 – and specifically below its 200-day MA – will be bullish for the rand.
* Enter in the direction of the new breakout: ie, if it closes above line 2 (9,94) go long the euro/rand (ie, short the rand). But a close below its 200-day MA (9,4575) will be a short signal on the euro/rand (long signal on the rand). Do whichever happens first.
* The target for an upside break above line 2 will set up a move to 11,30: ie, the height of pattern 1-2 projected up. But a close below its 200-day MA will set up a move to 9,10.
* For a breakout above line 2 the stop will be a close below 9,65. For a short signal on the euro the stop is a close above 9,70.
TIGER BRANDS – UPSIDE
Trend: Short and long term sideways. Medium term technically down.
Strategy: Buy.
* Tiger Brands has been in a falling channel (lines 2 and 3) over recent months and is now breaking to above line 3 of the channel. It’s testing its falling 50-day MA (resistance) but is likely to continue up, because it now has a higher target.
* The daily stochastic oscillator (on top) isn’t yet overbought (which is bullish). Note how it gave a positive divergence (as labelled) to forewarn of the current rally.
* Buy it at current levels: it was trading at R180,68 at the time of writing.
* Its minimum upside target is to R189,20, measured as the height of the channel projected up. Take half profits there but leave some on for further upside potential to R195.
* The initial stop-loss is a close below R172. Once it gets to R189,20 raise your stop to a breaking of its prior three-day low.
* Note: Line 1 is long-term support at R168. If it does happen to fall to that before rallying significantly then buy off/near line 1. The stop will be a close below R168.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
