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THE JSE ALL-SHARE INDEX bounced back sharply after giving a failed break to the downside. The rally back was powered by short covering (ie, traders buying back their short positions). However, one stock that’s been very steady over recent weeks is Richemont. We show its chart and the probability for its next move. We also look at food retailer Shoprite, probably the most consistent performer in the Top 40 over recent years. It’s pulled back to buying levels.
RICHEMONT – BREAKOUT COMING?
Trend: Short and medium term sideways. Long term up.
Strategy: Buy on a breakout.
* While most industrial stocks have dropped over recent weeks, Richemont has shown excellent relative strength by moving sideways. It’s formed a broadening formation (lines 1 and 2), which is most likely a consolidation before another rally.
* Lines 3 and 2 form a bullish ascending triangle.
* More aggressive traders buy as close to line 3 as possible (3925c). More conservative traders should wait for a close above line 2 (4065c) to buy.
* Once it closes above line 2, the minimum upside target will be 4400c, measured as the height of pattern 1-2 projected up. Take short-term trading profits there; but more medium-term players to keep holding. It has a medium term target of 4700c.
* In terms of stop-losses, for buying near line 3 place your stop as a close below 3800c. For buying on a close above line 2 the stop will be a close below line 3 (below 3900c). The price at the time of writing was 4035c.
SHOPRITe – OVERSOLD
Trend: Short and medium term down, but oversold. Long term up.
Strategy: Buy above line 2.
* After breaking line 1 support early in January, Shoprite has continued pulling back and is currently finding support at its 200-day moving average. (The first time it’s tested its 200-day moving average in two years.) The price needs to get above line 2 resistance to start rallying again.
* The daily stochastic oscillator (on top) is moving up from its oversold region, which is a bullish sign. The weekly stochastic is also oversold (bullish).
* Buy it on a close above line 2. (Line 2 was at 9460c on 14 February and line 2 declining at an angle of 20c/day thereafter).
* The target will be a retest of its R104,90 high. Take partial profits there. Take more profits at R109 if reached.
* The initial stop is a close below line 3 (8800c). Once it reaches R104,90 take partial profits and move your stop up to a close below 9750c.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
RICHEMONT – BREAKOUT COMING?
Trend: Short and medium term sideways. Long term up.
Strategy: Buy on a breakout.
* While most industrial stocks have dropped over recent weeks, Richemont has shown excellent relative strength by moving sideways. It’s formed a broadening formation (lines 1 and 2), which is most likely a consolidation before another rally.
* Lines 3 and 2 form a bullish ascending triangle.
* More aggressive traders buy as close to line 3 as possible (3925c). More conservative traders should wait for a close above line 2 (4065c) to buy.
* Once it closes above line 2, the minimum upside target will be 4400c, measured as the height of pattern 1-2 projected up. Take short-term trading profits there; but more medium-term players to keep holding. It has a medium term target of 4700c.
* In terms of stop-losses, for buying near line 3 place your stop as a close below 3800c. For buying on a close above line 2 the stop will be a close below line 3 (below 3900c). The price at the time of writing was 4035c.
SHOPRITe – OVERSOLD
Trend: Short and medium term down, but oversold. Long term up.
Strategy: Buy above line 2.
* After breaking line 1 support early in January, Shoprite has continued pulling back and is currently finding support at its 200-day moving average. (The first time it’s tested its 200-day moving average in two years.) The price needs to get above line 2 resistance to start rallying again.
* The daily stochastic oscillator (on top) is moving up from its oversold region, which is a bullish sign. The weekly stochastic is also oversold (bullish).
* Buy it on a close above line 2. (Line 2 was at 9460c on 14 February and line 2 declining at an angle of 20c/day thereafter).
* The target will be a retest of its R104,90 high. Take partial profits there. Take more profits at R109 if reached.
* The initial stop is a close below line 3 (8800c). Once it reaches R104,90 take partial profits and move your stop up to a close below 9750c.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
