TECHNICAL ANALYSIS: JSE retail index shows possibility of uptick

The JSE general retail index has broken out of a bullish chart pattern and has a higher target, as shown on its chart below. This implies more upside to come for local retail stocks.

JSE GENERAL RETAIL INDEX – More upside coming

Recommendation: BUY
Current Trend: Short-term up. Med-term turning up. Long-term technically down.
Strategy: Buy retail stocks.

Chart Setup: After initially breaking out of a falling wedge (light grey lines), it’s the retail index has gone on it break line 2, which is the neckline of a medium-term inverse head and shoulders (S-H-S).

• Note how it found support at line 1 in October, its long-term support line.
• Its short-term Stochastic is in its overbought zone, so we might get a few days cooling off before it heads higher again.

(Daily)

Strategy Details: Buy the larger retail stocks. (E.g. MRP, TRU, TFG, and Woolies are looking very good, to mention a few). Pullbacks in retail stocks will be buyable on an ongoing basis at least until the target is reached, and probably beyond that.

Target: Up to 7 50 i.e. the height of the inverse head and shoulders projected up. Line 3 will be potential resistance in that area, so the price is likely to stop there (temporarily). Further potential over the med-term will be to retest its all time high area at 9 100. (It was trading at 7 380 at the time of writing).

Stop-loss: For now, it’s a close below 6 900 using this index as the guide for retail stocks. From 7 600 on this index raise the stop to a close below line 2 (e.g. below 7 060). As it gets near 7 800, tighten short-term stops e.g. to a breaking of prior two-day lows.

• Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author, or attend trading courses, please go to www.themarket.co.za

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER