Article / 19 July 2016 at 11:15 GMT

South Africa Watch: JSE Top 40 grinding higher after Brexit

Head of Private Sales / Saxo Capital Markets - South Africa
South Africa
  • Advancers now outpacing decliners on the JSE Top 40
  • Market is looking to Thursday's interest rate decision for direction 
  • Foreign buying of South African stocks at record high
JSE building
The JSE Top 40 has been slowly moving to the upside after the Brexit
shock in June. Photo: iStock 

By Dylan Bester

Having a look at market breadth:

momentum 19th July

Momentum Up and Down shows the previous day's Top 40 stock direction and short-term moving average direction.

Advancing and Declining stocks in the Top 40 shows the amount of stocks for the previous day that have closed higher or lower overall.

In the last week, the overall momentum of the Top 40 has been sideways, which is clearly shown by the momentum indications above. Over the past few weeks, however, the amount of advancing stocks has gradually increased and is finally higher than declining stocks.

Currently, we are in a sideways pattern on the overall Top 40 and, following the trends from the global markets and grinding higher on a daily basis, the trend continues.

A break above 46,500 could open up a target towards the 47,000 level, which should continue to provide further momentum to the upside.

Technical events that have occured recently on the JSE Top 40 (ZA40.I)
JSE Top40
 Source: Saxo Bank

JSE Top 40 (ZA40.I) grinding higher after Brexit

Momentum: Favouring the upside since July 8, and confirmed by the short- and medium-term crossover that is still continuing.

Risk: Average true range moves on a daily basis have slowed down to 300 point swings.

Stochastics: Mixed around the 55 level, and not showing overbought or oversold ranges, confirms current ranging.

Volume: South Africa has seen net foreign buyers of local equities over the last month spike to all-time highs.

Chart: Currently the Top 40 is trading between a range of 46,000 and 46,500. A break in either direction would meet the trendlines drawn from higher lows and lower highs.

Resistance on the upside comes in at 47,000, which also closes a gap formed during Brexit. The catalyst that could change this is the interest rate decision in South Africa on Thursday.

Last week's trade update:

MTN Group (MTN:xjse): Continues sideways between R150 and R125, with no clear direction as yet and a fundamental bias for further weakness. 

BHP Billiton PLC (BIL:xjse): On a medium-term outlook and a possible break to the upside, the resistance channel has been tested and not broken. We are still waiting for a break above R200. 

— Edited by D. Deacon

Dylan Bester is a trader on Saxo Bank's South Africa desk


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