Article / 05 July 2016 at 11:49 GMT

South Africa Watch: A sideways glance

Head of Private Sales / Saxo Capital Markets - South Africa
South Africa
  • Declining Top40 shares likely to continue lower
  • Barclays Group trending sideways, momentum still down
  • Top40 channel support at 45,000

South Africa
Hunting for waves: The benchmark South African index is trading in a sideways channel, 
but a renewal of downside momentum appears probable. Photo: iStock 

By Dylan Bester

Let's take a look at market breadth, Barclays Group and the Top40, and some recent technical events:

Momentum 5th July

Momentum up and down shows the previous day's Top40 stock direction and short-term moving averages direction.

Advancing and declining stocks in the Top40 shows the amount of stocks for the previous days that have closed higher or lower overall.

Momentum and declining stocks are in favour of the downside and further weakness.

The overall momentum has favoured the upside over the last week since a large gap lower after the UK referendum vote. The Fibonacci retracement levels from the most recent highs and lows show that a 61.8% retracement has been hit at 46 361, which has held price of the overall index subdued.

Technical event triggered on Barclays Group:
BGA group

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Source: Saxo Bank 

Barclays Group Africa: Trending sideways, momentum still down

Momentum: Short- and medium-term momentum is currently downward and targeting lows seen during the UK referendum announcement.

Risk: Daily swings have been increasing as volatility and uncertainty is high, a move higher than R144 would mean momentum is fading on the downside.

Stochastics: With weakness and conviction of a solid move down as the indicator is close to 20, a grind lower towards support would be more probable.

Volume: Has been slightly thin over the last week with the lack of direction in the markets.

Chart: Momentum will be held up by support at R138.22, the wider range and support level is R128.83.

A look at the Top40

The overall Top40 index is very mixed at the moment and opportunities can be seen on the short side of the index, while a continuation of the downside momentum appears probable.

Chart: Currently in a wide range between 47,823 and 45,000 with resistance at 46,575 currently the bottom side of the gap and support at 45,000 for the overall sideways channel.

Source: Saxo Bank  

— Edited by Michael McKenna
Dylan Bester is a trader on Saxo Bank's South Africa desk.


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