Category Archives: Technical Analysis

Institutional Blindness


The Business Day reported on 10th April 2019 on the Investment Forum in Sandton where several asset managers talked about the major share collapses of the past three years – most notably Steinhoff, EOH and Tiger Brands. The big institutions and major fund managers (like Alan Grey, PSG and Coronation) lost hundreds of billions of rands when these stock market “darlings” suddenly collapsed.

But in each of these cases, there was clear technical evidence that all was not well long before they collapsed.

STEINHOFF

In the case of Steinhoff, the share made a perfect declining triple top at least 15 months before the Viceroy report came out and caused the share to collapse. Consider the chart:

Steinhoff (SNH) January 2016 to April 2019 – Chart by ShareFriend Pro (Click to Enlarge Image)

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Resistance


The concept of resistance is a very important part of the private investor’s understanding of the market.

Resistance occurs where a share or an index (or any financial data stream) reaches a top where it has been before – and then the question arises, “Will it penetrate that level?”

Perhaps there are large sellers who have standing orders with their brokers to sell out when and if the share reaches that level. That means that as soon as that level is reached, the share will fall back on increased selling.

This process of the market bumping its head against a ceiling can lead to a double top or even a triple top. Sooner or later, however, the situation will be resolved. Either the level will be penetrated convincingly on the upside or the market will become afraid and fall back. So resistance levels inevitably cause a period of uncertainty as everyone waits to see what will happen. Read More

S&P500 Support


Investors have been nervously watching the progress of Wall Street against the background of mounting allegations against Donald Trump and senior members of his staff, and the “trade war” which he has instigated against China. At the same time, investors are also concerned that the continuing strength of the US economy will result in a more rapid increase in interest rates going forward.

The effect of this nervousness has been to take the S&P500 index into a correction from its all-time high of 2930 made on 20th September 2018. The fears usually associated with October month are now well behind us and it is unusual for markets to be in a corrective phase over the festive season – but then the political situation in America is nothing if not unusual. Read More

S&P500 Earnings


Whether we like it or not, the progress of the JSE is determined to a considerable extent by what happens on Wall Street. If the New York Stock Exchange (NYSE) is in a bear trend then the high probability is that the JSE will also be heading south. So, private investors are always well-advised to keep their eye on American markets and to take a view on where they might be going.

The best way to follow the NYSE is through the S&P500 index. This is a weighted index of the 500 largest companies trading on Wall Street. The 500 companies which it includes are constantly the subject of intense analysis and prediction.  American companies report every three months – so the quarterly updates are eagerly awaited and anticipated. Read More

Speculating on Aveng


Aveng was once the largest construction company in South Africa and in August 2008 it traded for just under R70 per share. Since then it has been hammered by a host of problems beginning with the 2008 sub-prime crisis, to the dearth of construction work following the 2010 World Cup, the heavy fines imposed on the construction shares by the Competition Commission for collusion and several big contracts that went bad. The result of all this has been that the share price has plummeted to just 5c. Read More