Technical Tuesday
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The outlook for the South Africa 40 Cash Index, Gold, Oil and the Rand
Breakout, trend following and pair trading opportunities on local and international shares
Entry levels, target prices and failure levels
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Contact us: 010 500 8624
Call 010 500 8624 or email newaccounts.za@ig.com to talk about opening a trading account. We're around 24 hours a day from 9am Saturday to 11pm Friday.
Contact us: 010 500 8624
16 July 2024
In the report this week, we look at the following markets:
- South Africa 40 Cash Index
- USD/ZAR
- Spot Gold
- Brent Crude Oil
- ABSA Group vs Firstrand Ltd
South Africa 40 Cash Index
The South Africa 40 Cash Index has now broken resistance at 74420. The close above this level suggests 75350 as the next resistance target from the move. Trading long into the breakout appears to provide an unfavourable risk to reward assumption. The overbought signal provides further uncertainty to the trade scenario.
Our preference is to wait for a pullback from overbought territory before looking for new long entry in line with the longer term uptrend bias.
No cash adjustment expected
The South Africa 40 Cash Index is not expected to adjust for a dividend in the underlying for the week commencing 15th of July 2024.
USD/ZAR
The USD/ZAR has produced a bullish price reversal from just below the 18.00 support level. The reversal is accompanied by a move out of oversold territory. 18.50 becomes the initial resistance target from the move, while a close below the 18.00 level would suggest the reversal to have failed.
Spot Gold
The price of gold has continued to gain and is now testing a break of upper range resistance at 2430. A close above this level would confirm the break with 2450 and 2500 the next upside resistance targets from the move. Traders who find long entry into an upside breakout (should it occur) might consider using a close below the 2375 support level as a stop loss indication. Gold is trading in overbought territory which does caution the move.
The long term trend for gold remains firmly up and as such traders might continue to prefer a long bias to positions on the commodity. Should the price end up reversing off the 2430 resistance level instead of breaking it, trend followers might prefer to wait for weakness to play out before looking for new long positions rather than trying to short the move.
Brent Crude Oil
The price of brent crude in now breaking the 84.20 support level. A close below this level would confirm the downside break and suggest 81.90 to be the next support target from the move. In this scenario, traders who are short the commodity might consider using a close above the one day high as a stop loss indication.
ABSA Group vs Firstrand Ltd
The pair considers a Long ABSA Group position against a Short Firstrand position. The net result of these combined trades looks for a 21% profit margin. A stop loss is considered of equal proportion to the expected gain.
A successful pair trade can be realized 1 of 3 ways:
1. The long position rises while the short position falls
2. The long position rises faster than the short position rises
3. The short position falls faster than the long position falls.
The blue line on the chart represents the ABSA Group / Firstrand ratio which recently traded more than 2 standard deviations below the mean (middle line). A successful trade would require the ratio (blue line) to return to the mean to meet the guided profit target.
Get full report
For the full report, which adds trade opportunities on local and international shares, click the link below
Get full report
For the full report, which adds trade opportunities on local and international shares, click the link below
Shaun Murison
Our weekly technical report is compiled by in-house senior market analyst, Shaun Murison.
Shaun has worked in financial markets for over ten years. As market analyst, he presents our CFD trading seminars around the country. In addition, Shaun is a regular commentator on the local financial markets, contributing to various media (such as CNBC Africa and Business Day) and writing daily and weekly market reports. He is a registered person at the JSE as well as a Certified Financial Technician (CFTE). You can follow Shaun on Twitter at @ShaunMurison_IG for regular market updates and insight.
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