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WE SHOW A HIGH PROBABILITY price move developing in resources stock African Rainbow Minerals (ARM). Its chart also gives a clear upside target. Other resources stocks should follow. We also give a US dollar/rand chart that shows the rand heading towards support after a recent bout of weakness, as well as the level to monitor for buying (going long) the rand again.
ARM – A RALLY COMING
Trend: Up on all major timeframes, despite recent pause.
Strategy: Buy
* African Rainbow Minerals (ARM) is consolidating over the short term in a small broadening formation (lines 3 and 4). It’s also nearing line 2 support and its rising 40-day moving average (support). There’s a higher target from a medium-term inverse head and shoulders (as labelled) of R210. (It was at R190 at the time of writing.)
* The short-term stochastic oscillator (on top) has pulled back to a relatively oversold level: therefore downside is limited.
* Traders buy as close to line 2 (R190) as possible (for aggressive traders). But more conservative traders wait for a close above line 4 (R198) to buy.
* The latter event will point to the same target of R210 (based on pattern 3-4).
* If buying off line 2, keep your stop-loss as a closing price below R181. Once the price closes above line 4 (R198), move your stop up to a close below R189. For traders buying on a close above line 4, use a close below R189 as your stop.
US$/RAND – RAND TO RALLY
Trend: Short term rand weakness. Medium term sideways.
Strategy: Prepare to go long (buy) the rand.
* In mid-November, the US dollar/rand broke out above line 3. It’s heading towards line 1 (7,23), but can reverse back down at any time. There’s still a large broadening formation in place (lines 1 and 2), pointing to a stronger target for the rand.
* The short-term stochastic oscillator is overbought for the US dollar and giving a negative divergence there: ie, warning of the rand to rally again.
* Go long (buy) the rand on a close below line 4 (7,1380).
* Note: It can still drift to 7,23 (line 1 extended across) and to its 200-day moving average at a push (at 7,32). But once the rand closes below line 4, look for a final rally to 6,58 (ie, the height of pattern 1-2 projected down). Thereafter, I expect a large sell-off in the rand.
* Once the buy signal is triggered, place your stop as a close above 7,24. When it gets below 6,75 take partial profits and move your stop to a close above 7,02.
Please note: For more recommendations and charts by the author on shares, indices, commodities and currencies please go to www.themarket.co.za.
ARM – A RALLY COMING
Trend: Up on all major timeframes, despite recent pause.
Strategy: Buy
* African Rainbow Minerals (ARM) is consolidating over the short term in a small broadening formation (lines 3 and 4). It’s also nearing line 2 support and its rising 40-day moving average (support). There’s a higher target from a medium-term inverse head and shoulders (as labelled) of R210. (It was at R190 at the time of writing.)
* The short-term stochastic oscillator (on top) has pulled back to a relatively oversold level: therefore downside is limited.
* Traders buy as close to line 2 (R190) as possible (for aggressive traders). But more conservative traders wait for a close above line 4 (R198) to buy.
* The latter event will point to the same target of R210 (based on pattern 3-4).
* If buying off line 2, keep your stop-loss as a closing price below R181. Once the price closes above line 4 (R198), move your stop up to a close below R189. For traders buying on a close above line 4, use a close below R189 as your stop.
US$/RAND – RAND TO RALLY
Trend: Short term rand weakness. Medium term sideways.
Strategy: Prepare to go long (buy) the rand.
* In mid-November, the US dollar/rand broke out above line 3. It’s heading towards line 1 (7,23), but can reverse back down at any time. There’s still a large broadening formation in place (lines 1 and 2), pointing to a stronger target for the rand.
* The short-term stochastic oscillator is overbought for the US dollar and giving a negative divergence there: ie, warning of the rand to rally again.
* Go long (buy) the rand on a close below line 4 (7,1380).
* Note: It can still drift to 7,23 (line 1 extended across) and to its 200-day moving average at a push (at 7,32). But once the rand closes below line 4, look for a final rally to 6,58 (ie, the height of pattern 1-2 projected down). Thereafter, I expect a large sell-off in the rand.
* Once the buy signal is triggered, place your stop as a close above 7,24. When it gets below 6,75 take partial profits and move your stop to a close above 7,02.
Please note: For more recommendations and charts by the author on shares, indices, commodities and currencies please go to www.themarket.co.za.
