Truworths Long Position

Truworths has been a very choppy stock over the past 6 months. The length of the candles on the weekly chart reflects a high degree of volatility and while the 21 EMA is above the 89 EMA on the weekly chart (one of our indicators of a longer-term bullish trend being in place), the chart itself just appears noisy in isolation. Looking at the weekly stochastic however we see that it appears to have a fairly bullish shape sloping upwards without being overbought yet and we also see that as at the end of last week there was a long-tailed candle formed on a weekly basis.

On the daily chart we see that now the stochastic has been forced into an oversold condition and that price has retraced just over 61.8% of the way back towards its previous swing low. The daily candle forming as the stock went ex-dividend is also quite interesting and could be seen as a spinning top - generally indicative of uncertainty around which direction the price will next move and potentially indicative of a reversal in the making. Another interesting feature is to see volume has been steadily declining in line with the retracement over the past couple of weeks also adding some credence to a potential bullish trend resumption.

Lastly looking at the support and resistance on a daily close basis we see the price approaching a strong level of support going back for about a year. There's also some indication of lateral support and resistance levels at R81.00 and R94.00 respectively - although as marked up on the chart R89.00 - R89.50 is also a potential resistance area.

Our plan is to fade a reversal from around the R83.00 level and setting the stop as a close below the support level at R81.00. Target level is R89.00 (not swinging for the fence in the current environment) - that would yield a gross 3-1 reward-risk target. Grading for this trade is 55%