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TECHNICAL ANALYSIS: JSE retail index shows possibility of uptick

Dec 04 2018 17:25
Colin Abrams

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)

chart


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

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equities  |  retail  |  jse  |  markets
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