Resource Short Setups Part II

Its all a bit insane in the resource space at the moment and following on the short setups over the weekend as highlighted here, we now have very similar short setups on AMS and KIO as noted below.

Setup details as follows:

KIO - Short in the R79.23 - R72.47 zone with downside targets at R58.96, R45.45 and R38.70 

AMS - Short in the R244.82 - R230.62 zone with downside targets at R202.23, R173.84 and R159.65

Resource short setups

A couple of near identical patterns emerging for ARI and AGL in the form of bearish continuation breakdowns being displayed on the 3LB charts. In both instances we see that the bearish longer-term trend has resumed and that the previous swing low as per the daily 3LB charts have been broken - indicative of an increased likelihood of further weakness.

The setups below are as follows:

ARI- Short in the R61.69-R60.11 zone with downside targets at R56.95, R53.79 and R52.21. The initial stop comes in as a close above R63.27

AGL- Short in the R133.81-R130.00 zone with downside targets at R122.39, R114.78 and R110.98. The initial stop comes in as a close above R137.61

Netcare break-down short setup

Potential NTC short on the cards with the major trend as indicated by the 21/89 EMA pointing downwards and the 3LB breaking its previous low to the downside on the day. The setup has been marked up on the price chart - broadly we're targeting the R36.95 - R36.26 zone for entry with a stop in at R37.63 and targets to the downside at R34.89, R33.52 and R32.84.

Reunert breakdown continuation short trade

The 3LB on the RLO daily chart has broken below its previous swing low as indicated on the left hand chart and with the 21EMA< 89EMA this supports a potential further move downwards. Looking at the price chart on the right, we would set this up by entering the short at a break of Friday's low at R61.75 with a soft stop in at a close above R65.25. Target levels to the downside are highlighted and we will also look to ratchet the stop down over time.

Aveng Continuation Short Setup

Aveng is in an extremely strong downward trend and it was noted that in these situations, the 3LB on a  daily basis can give good clues as to trend continuation. In this case, we see that after a brief rally the 3LB has broken its previous swing low and so we have entered a short position at R4.40 on the daily chart (off a bearish daily candle painted yesterday) with the view of an ultimate move to R2.75. We will however start ratcheting the stop downward once a close below the initial  target level at R3.85 is achieved.

Growthpoint counter-trend long setup

This particular system has not generated many triggers of late but another counter-trend setup has materialised as the end of day 3LB on Growthpoint painted green (white on the chart). Given the sharp pullback that price has experienced over the past month, this has set the scene for a potential move back upwards. The full target is at 3-1 with a proposed entry at R25.90 looking for a move to R28.36 and a stop as a close below R25.08 but if it does trigger we will look to ratchet up the stop to protect capital and preserve any profits which may materialise.

Advtech Long Position setup

Not a stock we trade often and in fact, its proving quite difficult to source a product provider for a CFD derivative so we may need to trade the underlying stock on for this one should there be a trigger. Starting off with the weekly chart, we see a strong uptrend in place with the weekly price chart well above the 21 and 89 EMA's. This is also supplemented by an interesting stochastic pattern where the stochastic started to reverse from overbought position but has now crossed back upwards over its signal line in what we refer to as a failed stochastic reversal - a very bullish signal.

The daily chart is equally appealing as well see a price retracement to and upward reversal from around the 61.8% retracement level. At the same time, the daily stochastic is oversold and reversing upwards. Additionally, the stock ended the week painted a big bullish engulfing candle on the daily chart.

The support and resistance chart also illustrates the strong uptrend in place and we can see that price has found support at the strong upward trending support line going back to April 2015. There also appears to be a break out of a triangular-type structure taking place.

The setup for this trade is quite tight given the prices involved but we would look or an entry at around the current price level of R12.25 setting the stop as a close below the last swing low of R12.05 and targeting the structure top at R12.70. This would yield a target reward to risk of 2.25-1. Grading for this trade is at 75%. Worth mentioning that without obtaining a leveraged position for this trade the capital outlay would be quite onerous trading the underlying given the tight stop involved.