Publications
Partners
With national elections looming in 2019, expect a busy start to the year and political noise abounding. And as global uncertainties continue – such as developments around the US-China trade war and Brexit – markets might remain jittery.
Of course, it’s no secret that 2018 has been a tough year for investors on the JSE. But this might in fact mean that opportunities should again appear on the local bourse – especially against expectations of pressure on growth in developed markets.
My stock picks for 2019:
Impala Platinum
Due to prolonged weakness in the price of platinum, Impala Platinum has commenced a major restructuring (resulting in R13bn in impairments of assets for the year to the end of June) at Implats Rustenburg during 2018.
Implats has broken out of its long-term bear trend and is trading sideways between 1 560c/share and 7 275c/share in what could be the consolidation phase of a bottoming-up pattern – a long-term bullish reversal pattern.
Go long: Continued upside through the halfway mark of the pattern at 4?420c/share could see Implats retest the 7 275c key level. The ascending phase of the pattern would commence above that level, with potential medium to long-term upside to 13 665c/share.
Don’t go long: If Implats struggles to trade above the 4 420c/share halfway mark and falls through key support at 1 560c.
Life Healthcare
Shrey Viranna has been CEO of Life Healthcare for just over a year, and his leadership is proving prosperous. The group saw revenue for the year to 30 September grow by 12.9% to R23.5bn.
Though Life Healthcare is still trading within its long-term bear channel, it has retained firm support at 2 305c/share and is approaching the upper slope of its channel. A breakout should trigger a 100% retracement to its all-time high.
Go long: A positive breakout would be confirmed above 3 050c and a gradual recovery back to its all-time high at 4 450c could then follow.
Don’t go long: If Life Healthcare should fail to breach the upper slope of its channel, expect downside through key support at 2 305c to extend the bear channel towards 1 455c.
Shoprite Holdings
A long list of woes, including a weak economy, service delivery protests and the first VAT hike in 25 years, contributed to Shoprite reporting its first earnings decline in 18 years during 2018. Shoprite, however, remains one of the best-positioned retailers on the continent.
Shoprite has plummeted towards its long-term support trendline (dated back to 2008) and held at 17 450c/share after testing an all-time high at 28 190c/share. This correction within its primary bull trend is in the form of a wedge, and Shoprite has breached the upper slope of this wedge. Though a positive breakout has yet to be confirmed, support retained above 17 450c/share would be a bullish sign.
Go long: A positive breakout of the falling wedge formation would be signalled above 20 500c/share. Shoprite could then gradually reclaim its losses towards its all-time high at 28 190c/share. The long-term target of the wedge (if upside should persist above the all-time high) would be at 36 285c/per share.
Don’t go long: If Shoprite should encounter resistance at 20 500c/share, refrain from going long. In this instance it could fall to its major support trendline – which would be breached below 15 410c/share.
Telkom
Telkom’s turnaround strategy appears to be paying off, and the company is now gearing into growth mode. During 2018 the telecommunications provider indicated plans to invest in opportunities where it sees growth, and to focus on data-driven growth.
After correcting for a few months, Telkom formed rising bottoms – a sign of growing buying interest. Having breached the upper slope of a one-year long triangle, further gains should be underway.
Go long: Upside through 5 825c/share would most likely appreciate the share price to the 7 460c resistance mark. Above that, the 8 535c/share-level should then be targeted.
Don’t go long: If Telkom encounters major resistance at 5 825c/share it could range with key support situated at 4 605c/share. A reversal below 4 160c/share would extend its initial correction towards 2 845c.
Woolworths
Woolworths indicated plans to drop the David Jones brand in SA, and rebranding it to its in-house “Classic Collection”. This could be what helps Woolworths get back onto its feet in 2019, after its very costly David Jones Australian misadventure.
Woolworths has been correcting in the form of a falling wedge since 2015 and within this wedge it has been trading sideways between 4?600c/share and 6 860c/share in 2018. The upper slope of the wedge formation would be breached above 5 850c/share.
Go long: A more promising buying signal would be triggered above 6?860c/share. Thereafter, Woolworths could gradually recover its losses through 9 615c, towards 10 800c/share.
Don’t go long: A reversal below 4 600c/share would mark a lack of investor confidence and extend losses to 3 650c/share and possibly to 2?765c/share.
Moxima Gama has been rated as one of the top five technical analysts in South Africa. She has been a technical analyst for 10 years, working for BJM, Noah Financial Innovation and for Standard Bank as part of the research team in the Treasury division of CIB.
This article originally appeared in the 20 December edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
