Monthly Archives: July 2018

The Ramaphosa Impact

Since the initial euphoria over President Ramaphosa’s election and inauguration, some of the excitement has worn off and the focus of the media has shifted back to South Africa’s many problems. Maybe we have forgotten that this new president is a consummate businessman in his own right and used to negotiating successfully at the highest level.

He has recently stated that it was his intention to bring in $100bn of foreign direct investment (FDI) in the next five years. This was a laudable and much-needed goal. But now it seems that his skill at attracting new investment into South Africa may be the game changer that everyone wanted. So far, since making that announcement, President Ramaphosa has managed to get $34bn in FDI – including $14,2bn from the Chinese President who he cornered at the BRICS (Brazil, Russia, India, China and South Africa) conference in Sandton. Read More

Sasol: Resistance Becomes Support

Two years ago we wrote an article in which we drew your attention to the fact that Sasol, following its precipitous fall in 2014, had entered a sideways market bounded by support at R360 and resistance at R492. In September 2016, we suggested in another article that:

“It now looks, technically, as though the Sasol share price should move back up towards resistance at around R490”

And that is what happened – but only this year. Not only did the share reach that level (R492) but it broke above it giving a clear technical buy signal.

So what happens next? Well, in technical analysis, once a well-established resistance line like this is broken, it then usually becomes a support line. Typically the share’s price, having broken convincingly above the resistance, comes back to find that exact same level and bounces off it. Consider the chart:

Sasol (SOL) March 2018 to July 2018 – Chart by ShareFriend Pro

Read More

US Economy and the Rand

The US Federal Reserve Bank’s (The Fed) decision to sell $20bn worth of bonds a month is a monetary policy decision aimed at reducing the size of the American money supply. When a government sells bonds it takes money out of the economy and replaces it with something that is not money (a bond) thereby reducing the money supply. Trading in government bonds by the central bank is known as “open market operations” and is a normal mechanism of monetary policy. The Fed’s pace of bond-selling might increase to $50bn a month or more. This will have the effect of making the US dollar more expensive against all currencies, including the rand. It is an effort to reverse the effects of the previous eight years of quantitative easing (Q/E). Read More

Steinhoff Breaks Up At Last

When a blue chip, institutional share like Steinhoff falls heavily, there are always private investors looking to buy it at its much reduced price hoping to make a quick profit. But there is great danger in taking a position too early.

Immediately after the Viceroy report was published, Steinhoff fell from around R55 to below 465c and hovered there for just over a week. Then it began to rally, reaching as high as 860c. This is a classic “bull trap”. Excited private investors jump in thinking the bad news is all discounted and the company cannot possibly have wiped out a net asset value of over R56 per share. Read More

The S&P500 Revisited

Three months ago, on 6th April this year we wrote an article about the S&P500 and the correction up to that point. We suggested that strong support had been built by the four unsuccessful attempts to penetrate the 2581 level (the green arrows). We said that the bulls would take heart from this and drive the market higher, back towards the all-time high of 2872. Consider the current chart:

S&P500 Index January 2018 to July 2018 – Chart by ShareFriend Pro

Read More