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Johannesburg - Anglo American is one of South Africa's blue-chip shares. In market capitalisation it lies third on the list, topped only by British American Tobacco and BHP Billiton.
Looking at the chart of Anglo, we see it traded as high as R350 and then fell 23% in just 19 days to bottom at around R270. This decline was followed by a 45-day rally that just about recovered all these losses.
The failure to advance past the previous high recorded, in technical terms, a double top. This is a bearish chart pattern. The subsequent decline lasted 25 days, and again dragged Anglo down with 21% to bottom on support that is now formed at R270.
Looking at the MACD indicator below, we see that the last low in price was unconfirmed by the MACD histogram. This has a bullish interpretation and serves as an early warning sign that price could be approaching a low.
The ADX indicator measures the strength of trend, up or down. Here we see that this indicator shows a strong trend - this time to the downside. It is also in the same one as was previously associated with a turning point, or an exhaustion in trend.
The advance we are seeing now is in accordance to what the indicators foretold.
The price looks to have more upside left, as it rallies towards resistance between R300 and R310. Failing to break above this level will be highly bearish for this blue-chip commodity share, which is now back on levels first seen in February 2007.
If price fails in the resistance zone we will aggressively adopt a bearish stance, especially if it falls below R280 again.
See the
chart attached for illustration.
- Fin24.com