Article / 26 May 2016 at 9:25 GMT

South Africa Watch: Remgro, Nedbank finding technical support

Head of Private Sales / Saxo Capital Markets - South Africa
South Africa
  • 60% of stocks advance on JSE this week
  • Remgro pushes higher after testing support
  • Nedbank gets support off downward sloping channel
    Which way are stocks headed this week in South Africa? Photo: iStock

By Dylan Bester

Market breadth and momentum in the Johannesburg Stock Exchange Top40 stocks has been mixed over the last week.

Market breadth shows that momentum is currently down overall across the Top40 shares with only 30% of the stocks staying above the short-term exponential moving averages.

This week we have seen 60% of the stocks slightly advancing against 40% of the decliners in the Top40, giving us an indication in to short term relief on downside momentum.

Two stocks that are a potential short-term momentum setup are Remgro and Nedbank 

Remgro Ltd (REM:xjse) – pushing higher after testing support

Source: Saxo Bank

Momentum: moving above shorter term momentum, testing the medium term momentum range at R245.30.

Risk: Average true range and daily moves are around 600c and a move of that magnitude below support would change the momentum direction.

Stochastics: moving from oversold region above 20 showing signs of an upward momentum.

Volume: spikes have been present over the last three days as prices move higher.

Chart: support at R236 have provided recent support, in a medium term range the resistance is at R259,possible move higher supported by momentum.

Nedbank Group (NED:xjse) – support off downward sloping channel
Source: Saxo Bank

Momentum: Currently above both short- and medium-term momentum averages.

Risk: The current price allows for R5 deviation from high to Lows. Below R169 today poses a risk of continuation to the downside — expected move is up by R5.

Stochastics: Above 20 and showing fast expansion to the upside, which means the downside momentum is still present in this downward range.

Volume: higher than average spikes have been present while moving off the support region and above short term momentum.

Chart: Downward channel is restricting potential upside and resistance is present at R183

The risk present in both these trades are measured by the average true range and a one-day move in the opposite direction of momentum, greater than the entry price.

— Edited by Martin O'Rourke

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


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