- Opportunities in the wake of Brexit
- South African Top 40 technical outlook
- Momentum in South African stocks
That Brexit shock was good news for gold miners. Pic: iStock
By Dylan Bester
The shock Brexit vote caused global markets to retreat and sell off in the face of
a potential European Union collapse. The environment is a risk-off one
which has seen long dated yields, gold and certain developed markets that don't have too much exposure to Europe
advancing aggressively. Riskier assets and equity markets are heading lower and searching for some reassurance from
central bankers and policymakers to support the market, and investors to provide calm and some guidance.
In terms of an outlook there is still a lot of uncertainty around what to do next. But already it's been confirmed that central banks will support the commerical banks as the future of the UK as a financial hub has been brought into
Opportunity: Gold stocks have been in high demand over the past few days and certain stocks with local exposure
(Rand) and no foreign exposure have also been receiving added interest in terms of safer assets to invest in locally.
There is no need to panic as we are still waiting for the actual outcome and a final parliamentary vote. Rumours are
about but the political views and meetings this week will provide some guidance going forward.
Top40 (ZA40.I): RECENT TECHNICAL EVENTS
Momentum up and down shows the previous days 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 been overall lower and declining.
An interesting point: The amount of advancing and declining stocks is the same as it was this time last week with 93% declining and showing a bias to weakness leading up to the Brexit vote.
The overall momentum has been at extremes and declining so far this week, while the amount of advancing stocks in the Top40 is a minimal o7%. Momentum is clearly down and some profit taking in this environment is possible and should come through and provide some breathing space.
Below are two stocks that have been analysed from a technical perspective.
TECHNICAL EVENT TRIGGERED ON TOP40 (ZA40.I)
The graph indicates technical events that have occured recently:
Top40 (ZA40.I) - Weakness across all emerging markets, causing large gaps lower
- Momentum: Heavily downward, initial opening gap was 4.46% down, forcing a momentum crossover.
- Risk: Has sky rocketed to 900 points move in either direction.
- Stochastics: Has crossed over before 80 and started moving lower, there is no evident divergence showing.
- Volume: Across the Top40 shares 65% have witnessed volume spikes and this is supporting weaker price action.
- Chart: After the gap lower a continuation lower shows a strong commitment to the downside and a possible test of lower support at 42 418.
- Opportunity: Today should see a slowdown of downward momentum and test of resistance at 44,948. This allows investors that are concerned about their overall long-term portfolio losing further value, to hedge their total exposure for further downside potential moves later this week.
Last week Trade update:
Discovery Holdings (DSY:xjse) - Reached a low of R113 yesterday and hasn’t tested support at R110 yet, the downside bias still remains.
— Edited by Clare MacCarthy