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Johannesburg - Weekly charts can be used for a medium-term analysis indicating trends in the weeks and months ahead.
Below is a weekly chart of Anglo Platinum (Amplats).
Despite the advance off the R350 low in October 2008, you will notice that the recovery managed only a 38% retracement of the decline that started from R1 500 in May 2008. This was truly a spectacular plunge of 76% in only four months!
Also noticeable is that Amplats has been trading sideways around current levels for about eight months, as the recovery off the low stalled in September 2009.
In the first pane below the price, you can see that the volume accumulation has now turned down. This implies that volume is not following upside.
Below this, you can also see that the relative strength index is below the recent average. Momentum over the medium term can only be considered up if the RSI can break above this average.
The volume moving average convergence/divergence below is derived from the volume accumulation graph, and also indicates a slump in the trend of volume following advances.
The conclusion is that Amplats has probably recovered as much as can be expected. There is clear resistance at R810. Our trading system suggests buying Amplats if it can break above R800, with a probable advance towards R900.
If this does not happen, we believe that a decline below R750 will most likely indicate more downside towards R600 over coming months.
- Fin24.com