Short term trend reversals and opportunities within the financial sector
In this article we look at how the short term rebound could be indications of near term trend reversals and possible trading opportunities within the sector.
Locally listed shares within the financial sector have seen a sharp rebound over the last few weeks, a move which finds an inverse correlation with the USD/ZAR (as highlighted below). In this article we look at how the short term rebound could be indications of near term trend reversals and possible trading opportunities within the sector.
South Africa Financial Index
The South Africa Financial Index has broken out of a double bottom (blue ‘W’ on chart) reversal pattern. A double bottom is a suggestion that the downtrend which preceded its formation is reversing into a new uptrend. The price move above the 15140 level considers the breakout and confirmation of the pattern. A proportionate upside target is projected at 15940. Traders of the bullish pattern might consider using a a close below the 14860 level as a stop loss consideration.
The ABSA Group
The Absa Group has also broken out of a double bottom (blue ‘W’ on chart) reversal pattern. The price move above the 15500 level considers the breakout and confirmation of the pattern. 16500 provides the initial upside resistance target from the move. Should the price instead move to close below the 15090 level, the bullish indications would be deemed to have failed.
Firstrand Ltd
Similar to an inverse head and shoulders and double bottom reversal pattern, we see an A,B,C reversal pattern on the share price of Firstrand Ltd. This pattern is also a suggestion that a downtrend may be reversing into an uptrend. The move above the 6010 level considers the breakout from the pattern. 6450 provides the initial resistance target for the move, while a close below the 5880 level would consider the bullish suggestion to have failed.
Standard Bank
The Standard bank Group has also broken out of a double bottom (blue ‘W’ on chart) reversal pattern. The price move above the 17760 level considers the breakout and confirmation of the pattern. 19200 provides the initial upside resistance target from the move. Should the price instead move to close below the 17530 level, the bullish indications would be deemed to have failed.
Nedbank
The Nedbank Group also looks to be breaking out of a double bottom (blue ‘W’ on chart) reversal pattern, although this has not yet confirmed with a clear move or close above the 22820 level. Should the pattern confirm, 24020 provides the initial upside resistance target from the move. Should the price instead move to close below the 22000 level, the bullish indications would be deemed to have failed.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
