The longer-term trend on the weekly AECI chart remains bullish - albeit fairly choppy with a range bound-bias in place. The 21 week EMA remaining above the 89-week EMA for the past 2.5 years is also viewed as bullish. As at the end of last week we could also see the the stochastic advancing but not quite reaching the overbought level as yet.
Drilling down into the daily charts we see the daily stochastic moving oversold as price has retraced from around the R122.00 level. We also see a potential reversal painting today in the form of a green long-wicked candle.
Its worth mentioning again that AECI has very choppy trading action so its difficult to find "clean" support and resistance levels in the price action. So zooming out a bit and looking at the weekly support and resistance charts we can see the range-bound pricing action noted above with price moving between the R112.00 and the R122.00 levels and another resistance layer coming in at around the R130.00 level. At the moment we are operating close to the bottom of this range.
Our trade setup is going to be as follows. Enter the long at R114.00 which would represent a break above the potential reversal candle high. Set the stop as a daily close below R111.00 (we've pushed it slightly below R112.00 given the volatile nature of the price movements) with a target level of R122.00. This yields a target reward-risk of 2.67-1.
Our initial setup for the Foschini long position is posted here . While it didn't kick off well from out of the blocks, there was a dividend payout 2 days into the trade, which provided a useful underpin (and ultimately kept the trade in profit) and there was a significant positive movement coming through in the week leading up to the close-out. In line with our trading plan, we implemented a hard-stop 5 days into the trade and started shifting it upwards using a 3 day low as a basis. Unfortunately following the severe broader market sell-off coming through today, our stop was triggered late in the day and we ultimately closed out for a fairly modest 0.4-1 gross reward-risk. As noted in the graph, the close of R148.72 was slightly below the entry of R149.50 but after factoring in a dividend received of R3.25 and costs of R0.89, we netted a profit of R1.58 per share.
A few things to learn/note from the above:
- Price may quickly recover and move in the direction of our original target but we are applying strict risk management criteria and one element of this is to apply the hard-stop and protect our capital. These things are always trade-offs but in our view the protection of our capital is more important than a missed profit opportunity.
- The stochastic has moved overbought on a daily basis and further short-term consolidation or retracement can be expected given how it has now crossed back below its signal line.
- The stochastic has made a higher high and price has made a lower high. This can be seen as negative reverse divergence which is also a bearish indication
So on balance we are comfortable with our management of this trade overall.
This property stock has progressed very well in 2015 with a strong upward trend clearly featured on the weekly chart. The last 2 months have however been difficult as we can see how price pulled back pushing the weekly stochastic oversold and then how it rallied but ultimately ended last week with a long wick candle indicative of potential weakness early in the new week.
On the daily charts we see the expected follow through of short-term weakness yesterday - pushing the daily stochastic oversold. But today the daily candle was a bullish engulfing candle seeing a reversal off the 61.8% retracement level. We also have a sharp move of the stochastic back up over its signal line from the oversold level as well as a bullish moving average crossover with the 21 period EMA crossing the 89 period EMA upwards.
To capitalise on this setup we're looking for a quick move from R9.80 back to the highs near R10.20 with a close below R9.60 invalidating the trade. The reward-risk is only 2-1 so fading the break above R9.60 would be acceptable to improve the entry level.
The Tongaat weekly chart experienced a bearish crossover in late May when the 21 week EMA crossed below the 89 week EMA. Subsequent to that the price has started to pullback pushing the weekly stochastic into the overbought zone.
On the daily chart we see this pullback or retracement taking the price up from a low level painted in mid-June with the stochastic now at a point where it moved overbought and has crossed back down over its signal line. The retracement on the daily charts has been close to 100% of the down move from 28 May to 15 June. We also note the very bearish candle painted on 20 July 2015 which almost engulfs the prior day candle and provides a trigger for a potential move back on the direction of the longer-term bearish trend.
Finally, we look at the support and resistance graph where we can see a fairly strong resistance line in place at around the R136.00 level. As a counter-argument there is a potential inverse head and shoulders in place with that same level as the neckline and a break above that level could be regarded as bullish. However, given that the trend remains bearish and we are looking for a trigger move to take the short this is deemed an acceptable risk. On the support side there's a relatively wide area of support between R120.00 and R125.00 in place.
Our setup is going to be as follows. We are aiming to enter a short on a break of the previous day low at R131.90 and will set our initial stop as a close above the R136.00 resistance level. The target is mid-way into the support zone at R122.50 giving a reward-risk setup of approximately 2.29-1
Looking at the weekly chart of Tiger Brands, we can see that after consolidating and basing out in mid-June it's been slowly retracing over the past 6 weeks. This has however pushed the weekly stochastic towards the overbought level - although the stochastic looks like it has a fair bit of momentum behind it as at the end of last week as shown on this graph. The 21 period EMA as indicated by the blue line has crossed below the 89 period EMA which could be viewed as an indication of a bearish longer-term trend. We also note that the retracement is now at around the 61.8% level.
Drilling into the daily charts we can see evidence of a fair bit of choppiness over the past couple of weeks. The stochastic is generally looking overbought with some evidence of negative reverse divergence . The stochastic is now also starting to reverse from overbought conditions as is further evidenced by the price action over the past 3 days.
On the support and resistance chart we see clear evidence of the overall downtrend this stock has been experiencing over the past 6 months with a series of lower highs and lows punctuating the 6 month price action. The R294.00- R300.00 level also appears to be acting as a fairly solid resistance (previously support) zone over the past year. I don't use these very often but there is also a potential head and shoulders formation as marked up on the chart with price pulling back nicely to the resistance level to set up a short entry.
Entry setup as follows: Enter near break of previous candle low at R294.00 with an initial stop being an end of day clsoe above the R300.00 resistance zone. Target is set near the prior lows at R274.00 yielding a 3.33-1 reward-risk setup.
Clicks has been a strong performer in the retail sector over the past year but has been fairly range bound over the past 6 months. On the daily charts the stock has pulled back significantly over the past few days pushing the stochastic oversold. A bullish daily candle which could potentially be finding support at the 61.8% Fibonacci retracement level also painted on Wednesday 08 July.
The range support and resistance levels come in at at around the R85.50/R87.00 and R93.50 levels respectively illustrating the trading range fairly well.
Setup details as follows: Enter on intraday move above Wednesday's high at R88.00 with an end of day stop as a close below R85.50 and a target set at the top of the range at R93.50, This would yield a 2.20-1 target reward-risk setup.
Looking at a weekly chart of this stock we see that it has over the past 4-5 weeks been attempting a rally from oversold conditions following a substantial pullback from its Mid-April 2015 all-time high level. Overall with the 21 week exponential moving of price above the 89 week exponential moving average, it's also plausible to conclude that the longer-term trend of the stock remains bullish and we also see evidence of a potential positive reverse divergence playing out on the chart.
Drilling down into the daily charts, we see that over the last 2 weeks there has been a substantial retracement in price resulting in the stochastic on the daily chart moving oversold (now crossing back up over its signal line) and we have been looking for an opportunity to enter a long position to capitalise on a move back in the direction of the overall long-term trend as noted above. The potential for this materialised with the painting of a long-tailed candle on Wednesday 08 July.
From a support and resistance perspective, there is a strong lateral support level at around the R147.00 to R144.00 level going back exactly 3 years to July 2012. There are also potential overhead resistance levels coinciding at the R165.00 level.
Setup details as follows: Enter at R149.50 on a break of Wednesday's high - setting an end of day stop below support as a close below R143.50. Target is set at the R165.00 resistance level yielding an overall target reward-risk of 2.5-1 on the trade setup
