Tag: Formations

Altron


On 31 October 2017, we published our usual monthly Confidential Report and in it we drew your attention to Altron. What we said was:

“For the two years between 2014 and 2016, Altron did badly, but since then the share has executed a long slow “saucer bottom” and now appears to be mounting something of a comeback. The newly appointed CEO, Mteto Nyati, is at the front of this new optimism.

Consider the chart:

Altron (AEL) August to October 2017 – Chart by ShareFriend Pro

Read More

The Confidential Report – October 2019


United States

The Federal Reserve Bank of America (Fed) has cut rates again by a further 0,25% which indicates that the monetary policy committee (MPC) is still concerned about the possibility of the US economy sliding into recession.  At the same time Europe has resumed its quantitative easing program also because of fears of a recession. Some of this is certainly due to the trade war between America and China. Nobody is quite sure how that will play out in the world economy and the primary result has been a shift towards “risk-off”. This risk-off sentiment has had an impact on the S&P500 index and also on the South African rand. Consider the chart of the S&P500 since April 2019:

S&P500 Index April to October 2019 – Chart by ShareFriend Pro (Click to Enlarge Image)

This shows the previous cycle low at 2744 made on 3rd June followed by the rise to the all-time record high at 3025 on 26th July. After that, Trump managed to invoke the next correction with his China trade war taking the S&P down to support at around 2840. A period of sideways movement followed, generating a “flag formation” which we predicted on 4th September would break to the upside. That upside break has occurred, but a new record has not yet been set. The index is currently falling back towards the resistance line of the flag formation – which is at around 2932. That resistance has now become a support level.

In our view, we expect that the index will move upwards from current levels and break above the all-time record high – probably sometime in the next month. That will signal a resumption of the great bull market which has been in progress for over ten years since March 2009. Read More

Spur


The decision to buy into a share is often scary. What if the share falls after you have bought if? You may then have to execute your stop-loss and lose money. There is a tangible feeling of risk.

Obviously, you want to buy a share when it is at a low point in its cycle – after it has fallen so that you can get it cheaply. But when a share falls there is always a reason – and you might be concerned that it could fall further. There is usually considerable negative press which accompanies a falling share and you will definitely feel the risk of investing. In fact, if you don’t feel the risk you are probably not going to make any money.

Of course, the ideal place to buy a share is somewhere close to its cycle bottom – and that means that you must “see a mountain behind you”. In other words, the share should preferably have fallen from a much higher price.

At the same time, it is far better if the share is an established blue chip with a solid business and a long track-record of being profitable. That way you can be fairly certain that it is not going to fail completely and that sooner or later institutional fund managers will begin buying it again.

One of the ways to mitigate the risk is to at least wait until the share has turned and is moving up again. Ideally, you want to buy it when it is past its lowest point and is recovering. You are looking for some sort of upside breakout.

So, where do you find such a share? In this article we would like to draw your attention to a high-quality share which may be worthy of your consideration. Read More

Gold Surges


Six weeks ago, on 24th June 2019, we ran an article about gold under the heading “New Gold Bull”. In that article we drew attention to the fact that gold in US dollars had broken convincingly up out of a long-term wedge formation and we suggested that it was probably entering a new bull trend. Since then the dollar price of gold has risen by a further 7,8% to reach $1506. Consider the chart:

US Dollar Gold Price October 2010 to August 2019 – Chart by ShareFriend Pro

For South African investors, however, an investment in gold or gold shares on 24th June 2019 would have been significantly enhanced by the recent collapse of the rand to levels above R15 to the US$. The rand price of gold has surged from R20052 to R22596 – a gain of 12,7%.

Gold always has been and remains the world’s best defense against the weakness of paper currencies. It is the ultimate store of value. Unfortunately, it does not pay any dividends rent or interest, but it holds its value through thick and thin. Read More

The Confidential Report – August 2019


The Rand

For most of June and July this year, the rand was strengthening as international investors became more confident of the reforms which the Ramaphosa administration was implementing. Now the battle between Ramaphosa and the Public Protector has become sufficiently aggressive and dangerous to unnerve international investors – causing some of them to withdraw their funds from our government bonds with the result that the rand has fallen 7,5% in the last two weeks.

The yield on our R186 long bond has increased by 6,3% to 8,46%. Overseas investors are now willing to forgo this relatively high return because of the increased political risk in the country. Clearly, this trend is not good for South Africa or private investors. The fight within the ANC comes on top of the problems of financing Eskom and lower tax collections to indicate that the government deficit is probably going to widen substantially. Moody’s is under mounting pressure to follow the other ratings agencies and downgrade us to sub-investment.

Unfortunately, it is very difficult to ascertain exactly what is happening behind closed doors. We can only watch the markets, especially the rand and the yield on the  R186 for clues – and right now the news on that front is not good. The markets are communicating that there is a chance that Ramaphosa might lose his position of power in the ANC – and if that happens then the economy and the stock market will be in dire straits.

A new concern has arisen with RMB’s John Cairn’s saying that there is a high probability (47%) that the rand will fall by as much as 30% or more once the US begins a new cycle of reducing rates over the next year – simply because it always does that when interest rates are falling in the US. Against this, it seems that the recent cut in rates in the US is just a “mid-term adjustment” and not the beginning of a new trend of lower rates. Read More