Welcome to TheMarket



Welcome to TheMarket.co.za Weekly Analysis Report

Date of Issue: 01 April 2010

By Colin Abrams

|Contents: |

| |

|Intro and Exec Summary 3. Relative Strength 6. Overall Summary |

|1.Market Charts 4. Notes & Updates 7. Glossary (in first letter of each month) |

|2.Small-Cap Chart 5.“Shortable” Stocks/Indices |

|Classic Trading Rule: |

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|“As a trader try to achieve a state of impartiality (i.e. if the price is going up, buy; if it's going down, sell short).” |

FINDI STOCKS LOOK INTERESTING

Introduction:

After a minor pullback last week, the market has continued up again. However, one sector that has lagged over the past two weeks is the findi (financial and industrial stocks). Findi stocks are now looking very interesting again for the start of another rally, which can begin at any time. With resources stocks having had a good run in recent days, the short-term leadership is likely to swing back to findi stocks soon. As a result, some good trading opportunities are lining up there. We start with an update of the Dow Jones, which is consolidating before another move (most likely up). The JSE All Share index continues to edge higher, despite being overbought. It has higher targets in place, and still looks good. We show a chart of the JSE Financial 15 Index ('fini 15'). It looks similar to the findi 30 index (not shown), and both are pointing to higher targets in place. We also show a chart of the gold price ($), with the important breakout level to monitor. It is now forming a potentially bigger bullish pattern, but needs to give that breakout to confirm it. The stock charts looked at are Spar (pulling back to buying levels), Steinhof (oversold), and Exxaro (pausing before another rally).

The small-cap chart is Wescoal, on the AltX, which has given a bullish breakout for buying.

Overall, look out for new buy signals in financial and industrial stocks. This can occur at any time. The market still looks healthy despite being overbought in the short-term. As a result, the odds favour more upside in the short-term, although there may be minor pullbacks. The big picture also remains healthy.

|Executive Summary: |

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|Dow (chart 1): Traders re-enter on a close above line 4. |

|All Share Inx (chart 2): Hold/start locking in trading profits above 29 100. |

|Fini 15 Inx (chart 3): Traders hold, with a trailing stop. Prepare to buy again. Investors hold. |

|Gold ($) (chart 4): Buy on a close above line 1. |

|Spar (chart 5): Traders look to buy again. |

|Steinhof (chart 6): Traders buy on a close above line 2. |

|Exxaro (chart 7): Buy either a pullback to R123.50, or a close above 127.90 – first to happen. |

|Wescoal (chart 8): Buy on a pullback to R1.00 or lower. |

|Leading Stocks (3-mths): Top 40 – Exxaro, Abil, InvPlc, Kumba-IO, Richemont, Nedbank. |

|Resources 20 - Petmin, Exxaro, Merafe, Kumba-IO, ARM. |

|Shortable stocks/indices: 3 stocks, 0 indexes, 0 commodities, 3 currencies. |

1. MARKET CHARTS

DOW JONES – High, but likely to go higher

Broad Recommendation: TRADERS PREPARE TO BUY AGAIN.

Trend: Up, on all major time frames.

Strategy: Traders re-enter on a close above line 4.

Chart 1. (Daily)

[pic]

Chart Setup: The Dow consolidated sideways over the past week i.e. a consolidation through 'time' as opposed to a consolidation through 'price'. Lines 3 and 4 form a pennant, with the odds favouring another upside breakout.

• The Stochastic Oscillator (on top) is still overbought, and this is a good example how an oscillator can remain overbought for a long time during a strong trend. Nevertheless, one needs to be on guard that it can still sell-off at any time (short-term sell-off).

Strategy Details: For now, traders look to go long again (buy) on a close above line 4 (10 930).

• Investors keep holding overseas (and local) stocks.

• Note, if it closes below line 3 (10 840), expect a drop to 10 650 to buy again (less likely scenario).

Target: Upside targets (once the price closes above line 4) are 11 070 (take partial trading profits), and 11 230 (take remaining trading profits). Expect a correction then. Further targets are 11 550, and eventually to 12 350.

Stop-loss: When buying on a close above line 4, the initial stop is a close below line 3 (10 840). Once the price gets to 11 070 take partial profits e.g. half, and use a breaking of its prior 2-day low as your stop, taking the remaining profits a 11 230.

JSE ALL SHARE INDEX – Overbought but still positive

Broad Recommendation: TRADERS HOLD/TIGHTEN STOPS

Trend: Up, and still relatively overbought short-term.

Strategy: Hold/start locking in trading profits above 29 100. Pullbacks remain buyable.

Chart 2. (Daily)

[pic]

Chart Setup: After a three-day pullback last week, the price has continued back up as expected. The index did give a reversal candle down on Tuesday this week, so caution is advised for very short-term positions. There's a reasonable chance of retesting Tuesdays high (29 025) before we sell off again (short-term only)

• The daily Relative Strength Index (RSI, on top) is giving a negative divergence (see Glossary) from its overbought region, which is warning of a short-term correction to come.

Strategy Details: Pullbacks still remain buyable. Right now take partial profits at the 29 100 level, and keep a trailing stop on the remainder of your short-term position as a breaking of its prior one day low. The current stop right now though is a close below line 2. (Line 2 is at 28 510 on Thurs 1st, and rising at an angle of 40 pts per trading day thereafter).

• A reversal day/candle (see Glossary) up off line 2 or line 1 will be buyable again. (Line 1 is at 28 090 and rising at an angle of 60 pts per trading day thereafter).

• Investors keep holding stocks.

Target: While there is a minimum upside target of 29 600, we might get a pullback to line 1 from the 29 100-29 300 region. That's why taking at least partial profits (for traders) at the 29 100 level is a good idea. Bigger price, 31 400 looks very attainable.

Stop-loss: Current trailing stop is a close below line 2. Once we get to the 29 100 level take partial profits and use a breaking of its prior one-day low as your stop for short-term traders. If buying on a reversal day up off lines 2 or 1, place your stop as a breaking of the low of that reversal day.

JSE FINANCIAL 15 INDEX – Still bullish

Broad Recommendation: TRADERS HOLD/PREPARE TO BUY.

Trend: Up, but short-term overbought.

Strategy: Traders hold, with a trailing stop. Prepare to buy again. Investors hold.

Chart 3. (Daily)

[pic]

Chart Setup: The Fini 15 index is making its way higher to a minimum upside target from a large inverse head and shoulders (as labelled), which formed at the bear market lows. In early-March the index broke out of a wedge (lines 2 and 3). The price is edging ever closer to its minimum upside target. Line 4 is closest support, at 7980.

• The daily RSI (on top) is giving a negative divergence (see Glossary) from its overbought region. This is pointing to a short-term correction fairly soon.

Strategy Details: For now the index seems to be consolidating before another rally. Traders hold large-cap fini stocks, but keep a trailing stop as a close below 7950 for large-cap fini stocks in general. (Current level of this index is 8060). Buying can still be done near 7980. Also, a close above 8090 will be a buy signal for traders. Start taking trading profits as we near the target (see below).

• Corrections will remain buyable going forward e.g. to 7800 (on a reversal day up there) or at line 3 (7685). Investors keep holding large-cap financial stocks.

Target: The minimum upside target is 8400, measured as the height of the large inverse head and shoulders projected up (that's about 5% higher than current levels). In the short-term, though, traders should start taking profits at 8330, which is the target from pattern 2-3.

Stop-loss: Traders place your short-term stop as a close below 7950. Medium-term, the stop is a close below 7600.

GOLD ($) – Sideways consolidation

Broad Recommendation: WAIT FOR BUY SIGNAL

Trend: Short-term sideways. Med-term sideways to down. Long-term up.

Strategy: Buy on a close above line 1.

Chart 4. (Daily)

[pic]

Chart Setup: The gold price has moved sideways over the past few months and is potentially forming a larger inverse head and shoulders (than the one formed during February, shown here a few weeks ago). However, the price still needs to close above line 1 (the ' neckline', at $1128) to confirm this pattern.

• The price has pulled back to its rising 144-day moving average (note, a Fibonacci number), which has provided support a few times over the past year. There's a reasonably good chance of it holding again.

• In addition, the daily Stochastic (on top) is oversold, a bullish sign.

Strategy Details: All in all, the gold price might be about to rally again, but one needs to wait for a close above line 1 before buying. (Line 1 is at $1128 on Thurs 1st Apr, and declining at an angle of 50c per overseas trading day thereafter). (All on its "spot" price – see Glossary).

Target: Only if/when the price closes above line 1, will it setup a minimum target to $1230 i.e. the height of the inverse head and shoulders projected up. Long-term target is still $1350.

Stop-loss: Once the price closes above line 1, the initial stop will be a close blow $1105 (spot price). Or, a breaking of its prior 3-day low if preferred (as the initial stop).

SPAR (SPP) – Pulling back to support

Broad Recomenedation: TRADERS BUY. INVESTORS HOLD.

Trend: Short-term up, despite current pullback. Med and long-term up.

Strategy: Buy on a close above line 3, or a reversal day up off line 2 – first to happen.

Chart 5. (Daily)

[pic]

Chart Setup: Spar is pulling back to support at line 2 (R74.20). There is also support slightly lower at line 1 and the 50-day MA at R73. It is in a well-established uptrend.

• The short-term Stochastic (on top) is oversold, a bullish setup.

Strategy Details: Buy it on either a close above line 3, or a reversal day up off line 2 – whichever happens first. (Line 3 is at R75.50 on Tues 1st, and declining at an angle of 40c per trading day thereafter). Note, if the reversal occurs off line 1, that's also a good buying area. (Line 1 is at R72.95 on Thurs 1st, and rising at an nag le of 10c per trading day thereafter).

Target: While there is a medium-term target here of R84.50 (from a large breakout in mid-2009), take half trading profits at R78, and continue with a breaking of its prior 3-day low thereafter for short-term traders. Lock in further profits at the recent high of R79.35.

Stop-loss: If buying on a close above line 3, the stop is a close below R73.90. If buying a reversal day off line 2 or lower, the stop is a close below line 1. (Line 1 is at R72.95 on Thurs 1st, and rising at an angle of 10c per trading day thereafter).

STEINHOF (SHF) –-Reaching support, oversold

Broad Recommendation: TRADERS BUY. INVESTORS HOLD.

Trend: Short and med-term sideways. Long-term up.

Strategy: Traders buy on an close above line 2.

Chart 6. (Daily)

[pic]

Chart Setup: Steinhof has pulled back quite sharply over the past 10 days. It is near line 1 support (R19.50) and formed a bullish reversal candle yesterday (a 'hammer'). It is also at the 50-day moving ave, which typically provides support.

• In addition, the short-term Stochastic (on top) is oversold. Therefore look for a new rally at any time.

Strategy Details: Traders buy on an close above line 2. (Line 2 is at R20.10 on Thurs 1st, and declining at an angle of 25c per trading day thereafter).

• Investors keep holding.

Target: Traders lock in half profits at 21.50 and continue i.e. a breaking of its prior 2-day low thereafter as your stop. Potential to R22.20.

Stop-loss: Initial stop (after it closes above line 2) is a close below R19.50 (line 1).

EXXARO (EXX) – Minor consolidation, bullish

Broad Recommendation: TRADERS PREPARE TO BUY AGAIN.

Trend: Up, on all major time frames.

Strategy: Buy either a pullback to line 1 (R123.50), or a close above line 4 (127.90) – first to happen.

Chart 7. (Daily)

[pic]

Chart Setup: Exxaro, currently the strongest share on the Top 40 index over the past 3 months, is consolidating in a small broadening formation (lines 3 and 4) before breaking out again to the upside. It is also in a med-term rising channel (lines 1 and 2).

• The short-term Stochastic (on top) has pulled back from its overbought level, but is not oversold. Consequently the price can still consolidate a bit more before breaking out.

Strategy Details: Traders buy again/or buy more if in, on either a pullback to line 1 (R123.50) (and reversal day up from there), or on a close above line 4 (127.90). Do whichever happens first.

• Investors keep holding.

Target: Traders lock in some profits at R133, and continue with a breaking of its prior one-day low thereafter as your stop. If it gets to R136/137 take more profits. Look for it to eventually get out line 5 at R139 (which is a Fibonacci level). But it will most likely pull back before reaching line 5, to give another entry opportunity.

Stop-loss: If buying off line 1, the stop is a close below R121.50 for traders. If buying on a close above line 4 (R127.90), the stop will be a close below line 1. (Line 1 is at R123.55 on Thurs 1st and rising at an angle of 80c per trading day thereafter). Trailing stops once it gets going, are as mentioned above.

SMALL-CAP. CHART

WESCOAL (WSL) – A significant breakout

Broad Recommendation: BUY ON A PULLBACK

Trend: Up.

Strategy: Buy on a pullback to R1.00 or lower.

Chart 8. (Daily)

[pic]

Sector: AltX Current Price: R1.19

Chart Setup: After basing sideways for about a year, Wescoal has broken out of a large ascending triangle (lines 1 and 2). This points to more upside to come.

• The daily RSI (on top) is overbought, so look for a pullback soon, to retest its breakout point (line 2) at R1.00. TIP: Buying the first pullback after a breakout is a high probability event.

Strategy Details: Buy it on a pullback to line 2 (R1.00), or lower.

Target: Minimum upside target is R 1.75 i.e. the height of the large triangle projected up. Longer-term it might go back above R2.00, but to R1.75 will ensure a very good profit.

Stop-loss: Initial stop is a close below 88c. Note, this will result in a good risk/reward ratio (see Glossary) of approx 1:7 i.e. you are risking one unit to make 7 units.

Other small-caps of interest (alphabetically): (shares to consider on a pullback)

- Long: Octodec, Stefstock.

3. RELATIVE STRENGTH

➢ These are the strongest index stocks on a 3-month basis relative to the JSE All Share Index.

➢ Typically the leading stocks keep leading. Therefore, traders can buy these stocks on pullbacks, although always look at the chart first before making a decision. Medium and longer-term players should look to buy them when they first appear on this list.

Strongest seven Top 40 stocks: Exxaro, Abil, InvPlc, Kumba-IO, Richemont, Nedbank, Stanbank.

Strongest five Resi 20 stocks: Petmin, Exxaro, Merafe, Kumba-IO, ARM.

Resi 20 vs. Findi 30 over 3-months: Findi 30 stronger.

4. NOTES & UPDATES: - Concerning last newsletter’s index stock charts:

- ARM: pulled back to our mentioned buying level. Hold. It needs to close above line 3 shown in last week's report to break out. Target then to 210.

- Sanlam: is still consolidating in the short-term and hasn’t triggered the buy signal yet. Buy on either a pullback to 24.30 or a close above line 2 shown last week, which is currently at 25.20. Keep monitoring for the buy signal. Note: this is the way trading works, one has to "stalk" the trade until it gives the entry signal.

- Aspen: reversed up off our buying level yesterday to trigger the entry signal. Keep holding. Stop is a close below 75.50. Can still be bought if we get a pullback to below 77. Target is 85-88 for traders. No harm in locking in a bit of trading profits at 82 e.g. a quarter or third.

Other recommendations and index stocks of interest (alphabetical order):

Important Notice: When buying after a pullback or selling short after a bounce, always look for a sign of a reversal e.g. reversal day or reversal candle before entering (otherwise one is simply picking a top/bottom, which does not work). A reversal day/candle at the top is typically when the price rallies that day but then sells off to close near the bottom of the day’s range. Conversely, a reversal day/candle at the bottom is when the price initially drops that day, but then rallies back to close near the top of the day’s range. Waiting for the reversal day will put the odds back in your favour. (I usually like to see the high/low of the reversal day taken out the next day before finally entering).

- Regarding taking profits, I suggest locking in profits in thirds as the price moves in your favour i.e. 1/3 of your position, then another third then the final third.

High probability trades (or charts) I particularly like (long or short) at the moment (in no particular order):

• Foschini, Lib-Int, Northam, Mvela-Res, Tigbrands, Vodacom, Lonmin, Shoprit, PPC, Pick 'n Pay, Richemont, Nedbank, Sappi, Bidvest, Sanlam, MrPrice.

- Abil: traders re-enter at 35. Stop is a close below 34.90. Upside target is 39.50. If that stop is triggered, look to get in on a further slide to 33.70.

- Absa: if in, hold. Otherwise buy on an close above 142.90 or on a pullback to below 140. The former will take the price up to 146 for trading profits to be taken. Investors hold. Larger target now is 155.

- Altron: hold. Target is 32.30. Stop a close below 25.80.

- Anggold: triggered the short-term stop for a small loss/breakeven. It needs to close above 284.40 and particularly 289.50 to get going. In the meantime, if it drops to 272/268.50 it can be bought as fairly low risk down there. Stop a close below 268.50

- Anglo: gave a pullback to 298 but not quite as much as I'd have liked. It has nevertheless raced through the first target of R312. The next target is 329. I'd recommend taking some profits here for traders, and continue with a breaking of its prior 2 day low as your trailing stop. Further target is to 334. If stopped out on the remainder of your position, look to re-enter at the 307 level.

- Angloplat: has had a good rally. There is resistance at 747.50 where one should take some profits for traders, and use as breaking of prior one day low as the stop on the rest. A close above 748 will be a re-entry signal though, for a move to 772, and eventually to 825.

- ArcMittal: triggered the mentioned new buying signal. Minimum target to 94.50. Take most profits there and continue with a breaking of prior one day low as the stop.

- ARM: see update above.

- Aspen: see update above.

- Astral: pulled back to our buying level exactly (106) and then rallied sharply yesterday. Take partial profits at 119. Med-term target is 135. Stop a close below 104.

- Aveng: no trade here at the moment, and shorting not advised either. It is lagging MUR now. It needs to close above 40.65 to give a bullish breakout. MUR has already broken out. If it falls to below 35 then one can do some nibbling.

- Barworld: reached the 49.50 target already. Next target is 56. It is overbought. Try buying on a pullback to 46 again.

- Basread: has got within 10c of the 13.90 target so far. Hold/buy pullbacks e.g. to 12.85. Potential to 15.50 med-term. Stop a close below 12.10.

- BATS: gave a breakout to the upside of its mentioned triangle. Short-term target is 257/257.50. Hold. Med-term it's oversold which is a positive. Current stop for traders is a close below 250.

- BHPBilliton: triggered the buy signal and reached all three upside trading targets to round off a great trade. Current support is 248/248.50. Buy near there again. Stop a close below 247.40. Target 259-262. If the stop is triggered, then look for a drop to 239 to buy again.

- Bidvest: pulled back to our buying level before reversing up. Hold. Target is 147-150. Keep stop at 130.40 for now. Any pullback to 133 can be bought again if not in. Investors hold.

- Datatec: Target is 34, its edging ever closer. Hold. Stop is a close below 31.40.

- Didata: is getting to the 9.90 buying level. Stop is a close below 9.65. Target to 11.

- Discovery: hold. So far it got to 20c short of the 35.20 trading target. Stop is a close below 33.75. Can still be bought on pullbacks to there. Med-term hold regardless. Longer-term target is 40.50.

- DRDGold: Target is still 3.25 on the downside to retest the Nov low. We'll look at buying from there.

- Exxaro: see Chart 7.

- Firstrand: hold. Stop is a close below 19.75. It can still be bought near there for traders, with the same stop. Target to 22 (but start locking in some profits at 21). Investors keep holding.

- Foschini: try buying as close to 66 as possible. Stop is a close below 64.30. Target to 72, but lock in some profits a 70.50. Larger target is 79.

- Gfields: hold if in. Target to 94.60. If not in, buy either as close to 89.75 as possible (stop a close below 89.20), or buy on a close above 92.55 - first to happen. It needs to close above 95 to really get going and give a re-enter signal.

- Grindrod: triggered the short-term stop for a small-loss. There is a lot of resistance at 15.80-16. I don't think it will break through there just yet. Caution advised here still to the upside. A reversal day don from 15.80 will be shortable for a drop to 15-14.80.

- Group-5: has given a med-term upside breakout, but not convincing as yet. Nevertheless, a pullback to 34.50 can be bought. Target to 45. Stop then a close below 32.50.

- Harmony: is testing important support at 68.50. It can be bought off there, with your stop a close below 68.50. It needs to close above 71.50 to give a bullish breakout. Target then to 74.80.

- Imperial: a reversal day up off 99 can be bought. Stop is breaking of that reversal days low. If stopped out, look to buy from 94.50 (although I'm doubtful it will fall that far). Target to 110. Larger target is 121.50.

- Implats: reached and exceeded the first target for a nice profit. Look to buy again a reversal day up from 208 if it gets there. Med-term back to 228.70. Stop is a close below 203.80.

- InvPlc: pulled back to our mentioned buying zone from last week. If it pulls back even further, so much the better (e.g. to 58 or lower. Buy more then). Target then to 64.70-65.50. Med-term hold to a target of 78.

- Kumba-IO: is moving sideways in the short-term. Buy on an intraday break of 360 (stop a close below 353), or on a pullback to 342.20 (stop a close below 342 for traders) – whichever happens first. Target then to over 400.

- Lib-Hold: pulled back to the mentioned buying level. Stop is a close below 69.50. Short-term target to 81.50. Larger target is 92.

- Lib-Int: rallied to important resistance which is at 57.30 at the moment. It can be shorted with caution near there, or at 56.70. Stop is a close above 57.30. Target is 54.80 for half profits, then 53.80. If it does break out above 57.30 and close there that will be significant, for an eventual move 64.

- Lonmin: was doing very well until negative news yesterday saw it drop sharply. Nevertheless, the chart is still good, so keep holding. Target is 253. Stop is a close below 218. Can be bought on weakness towards 223 if that happens.

- M&R-Hld: triggered the upside breakout of a 7-motnh down channel the was no downward reversal day to short on fortunately. The breakout was on good volume which is a good sign. Buy on a pullback to 40.30. Minimum target is 49.20 now. It may well exceed that level eventually and go to 55. The construction sector as a whole is slowly but surely looking better, after being an extreme laggard for many months.

- Massmart: has stopped a bit short of the 112.80 target so far, but will probably get there soon. Important short-term support is 106.50 (rising by 50c per trading day). It is still very overbought, with divergences on its chart, and a close below this stated support level will see it drop to 101 where one should be buying again. Bigger picture is very good for it, with a target of 140 longer-term.

- Merafe: a nice profit made here as it moved to its 1.74 target today. The prudent approach here is to keep some on, and if it pulls back to 1.55 to buy more. Med-term target is 1.90. Short-term stop is a close below 1.50.

- MondiPlc: look to buy a reversal day up from 50. Stop a close below 49.50. Target up to 57. Note, if no reversal day up occurs, then buy from 47.

- MrPrice: has given a rare pullback. Buy on this pullback. A close above 40.40 (angle dropping by 30c per day) will get it going again. Initial resistance is 43.25. Once it closes above there, it will setup a target of 46.30. Initial stop is a close below 37.30.

- MTN-Group: fell like a stone, triggering short-term trailing stops. It is oversold, and has support at 110. Buy as close to there as possible, with your stop a close below 109.90. Take half profits at 119, and more at 123.50. A close above 124 will be very significant, which will setup a far higher longer-term target.

- Mvela-Res: buy on either a close above 46.50 or a pullback to 42.80 – whichever happens first. Target once it closes above the former level will be 53 for half profit taking and then on to 57. Stop a close below 41.

- Naspers-N: moving sideways over the past week. Stop for traders is a close below 314.50. If that hones then look to buy from 305. In the meantime it needs to close above 323 to get going again, for a move to 333 for taking more profits (traders). Larger target to 350.

- Nedbank: has exceeded our short-term target, with not much of a pullback. Next target is 148. Traders buy again on a pullback to 136 or lower. Stop a close below 134.50. Investors keep holding.

- Netcare: moving sideways at the moment. Hold. A close above 13.45 will be another buy signal (or a signal to buy if not in). Or, but near support at 13.10. Stop is a close below 13.05. Target is 14.10.

- Newgold: no clear trade here at the moment but my bias is to buy it at the 79 level (on a reversal day up). Stop is a close below 78.50. Target 83.40-85. The more conservative entry though will be to buy on a close above 80.40 (dropping by 10c per day). Same targets and stop will apply then.

- Northam: has a good rally over the past week and needs to close above 48.50 to give a new upside breakout for buying. No harm in locking in some profits now, but be sure to buy back that portion if it does give the breakout. In the meantime a pullback to 46.50 can be bought if that happens before the upside breakout. Once we get a close above 48.50 it will setup a minimum target of 53.90 for some profit taking, and then most likely up to 57.70..

- Old Mutual: has given the reversal up from our buying area. Hold. Short-term stoop is a close below 13.40. Med-term target to 15.70. (If for some reason that stop does trigger, then look to buy again from 13.10).

- PicknPay: has pulled back into our mentioned buying zone. Try still to buy as close to 42.30 as possible. Hold if in. Stop is a close below 41.70. Target 45.50. Med-term look for a move to 48.

- PPC: take short-term profits at 34.90. It's in a large med-term triangle between 35 and 32.20. Trade this range for now, but once we get a breakout above 35 (and closing above t) it will setup a med-term target to 41.

- Reinet: has moved to the top of its current sideways range at 11.98. Trade the range between there and 11.60. Best bet is to buy near 11.60 (stop a close below 11.50) or to buy on a close above 12. But aggressive traders can short near 11.98 for a drop to 11.60 with a tight stop above 12.

- Remgro: has pulled back into our mentioned buying zone to give a welcome pullback. It is getting oversold again in the short-term. If it drops to 94.40 then buy more. Stop is a close below 92.80. Target to 110. Investors keep holding.

- Reunert: dropped to the buying level again. Hold. Stop is a close below 55.50. Target to 62 then 65 med-term.

- Richemont: buy ideally as close to 28 as possible, and ideally a bit lower, e.g. 27.75. Initial stop then a close below 27.15 which is important support. Target to 29.50. It's getting oversold again, so the rally can start at any time. Investors hold.

- RMBH: gave the pullback for buying. Hold, short-term target to 33.70. Stop is a close below 30.80. It can also be bought off there if it pulls back to there. Larger target to 38. Investors hold.

- SABMiller: hold, its edging ever closer to its first target of 222 for some short-term profit taking. The next target will be 227 thereafter. It is somewhat overbought right now. If it does pullback to 212 or lower more can be bought on a reversal day up.

- Sanlam: see update above.

- Sappi: hold. It's moving sideways in the short-term, with a likely breakout to the upside to come. It needs to close above 32.90 to give the upside breakout, which will be another buy signal. Or it can also be bought at/near support of 32. Short-term stop is a close below 31.90. The minimum upside target is 35.35, and then to 37.40 med-term.

- Sasol: didn't trigger the short signal and shot upwards rather, as support held. It's pointing to a target of 320. Buy on a bit more pullback to 295.30-292. Stop is a close below 291.50.

- Shoprit: has given the first sharp pullback in a long time. Needless to say it is another opportunity to buy. It hasn't given an upside reversal day/candle yet on this short-term pullback, but the first one that occurs is buyable. It can still pullback to 70.50. Its main support level is 68.20 and it can be bought all the way down to there if it does pullback that far. Stop is a close below that level. Target is 84.50. Investors keep holding.

- Spar: see Chart 5.

- Stanbank: has pulled back in recent days to allow for buying again. It can be bought at current levels. Stop is a close below 113. Target is 119.30 for traders. . Investors hold. Larger target is 130.

- Steinhof: see Chart 6.

Telkom: reached the short-term profit target. Pullbacks to 33.25 can be bought. Stop a close below 32.50. Target back to 35.

- Tigbrands: is in a short-term consolidation in a generally bullish looking chart. A close above 186.50 will get it going again. Buy on that or on a pullback to 182 – whichever happens first (although the latter is more aggressive). Stop is a close below 181.50. One it closes above 186.50 look for the move to our target of 193. Investors hold.

- Truwths: traders hold if you bought on this pullback. It is below short-term support and can fall further to 49.50. But it's getting oversold on the daily chart so keep holding. A close above 53.70 (falling by 30c per day) will get it going again (and also be a buy signal if not in). Keep your current stop quite wide then as a close below 49.20. Upside target is 57.50/58 for traders. Investors keep holding.

- Vodacom: has given a sharp pullback after a good rally. It is in a buying zone again (now 55.20-54.20). Target is 58. Stop is a close below 54.

- Woolies: has pulled back with the other retail stocks to setup another buying opportunity. Buy as close to 22 as possible. Stop is a close below 22. Target to 25.10. It's getting oversold again, so the rally can occur at any time.

GOLD UPDATE: The JSE gold index still needs to close above 2240 to break out. An upside breakout will set up a move to 2465, and be a buy signal. For now the index is moving sideways in the short-term. If it can hold above 2166 that will be a positive sign for the short-term. If it doesn't hold that level further support is 2110, which will be a good buying level.

Dollar gold price: see Chart 4 for detailed commentary.

Rand gold price: continues to lag in the short-term. It has support at 7995. A close above 8200 will be a bullish sign to buy.

5. “SHORTABLE” STOCKS AND INDICES

Please note:

➢ We list the stocks and indices (local and overseas) that are in short-term (at least) downtrends, and that can be sold short (see Glossary for definition) on rallies to resistance.

➢ Selling short can be done via single stock futures, CFDs, spread trading, and/or put warrants.

➢ One way of trading these stocks/indices is to sell short rallies to the falling 20-day moving average (in stronger downtrends) or the falling 40-day moving average (in more gradual downtrends). These moving averages tend to act as resistance. Wait for a downward reversal at the moving averages before selling short.

➢ NOTE 1: ALWAYS USE PROTECTIVE STOPS ON ALL POSITIONS. Selling short is for short-term traders only, and all positions must be monitored closely.

➢ NOTE 2: The instruments on this list are not automatic shorts, but it is a starting point for looking. Always look at the chart first before making a final decision.

Shortable Stocks: (as of 01 April ‘10) Price (R) 20-Day MA: 40-Day MA:

DRDGOLD 3.7400 4.0790 4.3643

HULAMIN 10.9900 11.4165 11.7413

ILLOVO 29.7000 31.2190 31.9205

Shortable Indices/Currencies/Commodities: Price 20-Day MA: 40-Day MA:

C-EUR-$ 134.1000 135.6250 136.0325

C-EUR-ZAR 993.5900 1004.8440 1026.5085

C-GBP-ZAR 1104.1700 1113.6735 1152.9520

SUMMARY

Many index stocks (and indices) have taken a slight breather over the past week, and this is in all likelihood a pause before another up leg. The stocks with the most potential from current levels are financial and industrial (findi) stocks, some of which have had quite significant pullbacks recently (e.g. the retail stocks). Monitor for new trading buy signals in this large sector (i.e. findi).

One sub-sector that's starting to perk up is Construction. We need a more evidence that this is the start of a new sustained up move, rather than a dead cat bounce. It is looking encouraging however. The first pullback in these stocks, particularly MUR, will be very telling in this regard. This sector may well have bottomed.

Look out for tomorrows monthly 'Jobs Data' from the US which will have an impact on stocks prices.

Sincerely,

Colin Abrams

TheMarket.co.za

PS: Remember: Protective stops on all positions!

NEXT WEEK'S NEWSLETTER:

Please note next week's newsletter will again come out on Thursday (8th April), not Wednesday, due to all the holidays coming up over the next week. Wishing you a restful break over the long weekend.

UPCOMING COURSES - JOHANNESBURG:

Course 2: Advanced Technical Analysis (Level II) and Money Management - 11th April '10 (Sunday).

Course 3: Developing Trader Discipline (Trading Psychology) - 9th April '10 (Friday).

Please let us know if you'd like to attend (courses@themarket.co.za). Seating is limited.

GLOSSARY OF TERMS USED IN TheMarket.co.za NEWSLETTER:

• Bearish/Bullish Engulfing Pattern: A candlestick whose entire body ‘engulfs’ the body of the prior candlestick. Is bearish if found after a rally; or bullish if found after a drop.

• Bottoming tail: A price candle where the price falls sharply from the open, but then recovers to rally strongly into the close. A bullish sign.

• (Japanese) Candlesticks: Price bars (called ‘candles’) which accentuate the open-close relationship. Is an alternative to the Western bar-chart.

• CFDs: (Contract-for-difference) is a leveraged instrument, like a futures contract except there is no expiry date, and one trades the underlying itself, not a derivative of it.

• Closing price (or the 'close'): the last price of the specific time period chart e.g. last price of the day for a daily chart. If trading on the close, either execute your trade just before 5pm (if the specific signal is triggering), or first thing the next morning.

• Countertrend: 'going' (trading) counter to the main trend. E.g. if the main trend is up, then a countertrend trade will be to sell short. (Note it is always risky to take a countertrend trade, and generally not recommended. Remember, 'the trend is your friend').

Doji candle: A price bar (candle) where the opening price is equal to the closing price. Denotes indecision. Typically precedes a trend change.

• Double top: Refers to the rise of a stock's price, a drop, and then a rise back to the same level as the original rise – all occurring after a significant rally. Bearish.

Elliot Wave Theory: Each trend is made up of five waves in the direction of the main trend. (It can be further subdivided into the same sequence of waves on a smaller time frame).

Fibonacci retracement level: A point where prices typically find resistance/support when retracing a prior move - the most significant is 61.8% (others are 38.2%, 50%, 78.6%).

• Fibonacci extensions: Using Fibonacci numbers (e.g. 61.8%, 161.8%, 261.8%) to project future price targets (or reversal areas) based on the length of prior price swings in a particular stock

• Gravestone Doji: A candlestick that rallies sharply after the open, but then reverses down and closes at same level as the open (which is at the low of the bar). Looks like a gravestone. Bearish.

• Head-and-Shoulders price target: the minimum target is the height of the pattern to the “neckline” projected downwards from the breakdown point.

• Long position: Opposite of selling short i.e. buying because one expects the price to rise

• MACD: stands for Moving Average Convergence/Divergence. Is the difference between a 12-day and 26-day exponential moving average, plotted as a single line. Shows price extremes.

Negative Divergence: Is typically a bearish sign occurring when an indicator (e.g. RSI) fails to make a new high, but the price itself does i.e. setting up a divergence between the indicator and the price.

• Overbought: an area on an oscillator that typically indicates when more buying than selling (which has pushed prices up) is reaching an extreme level. A fall or correction is then due.

• Oversold: an area on an oscillator which typically indicates when more selling than buying (which has forced prices down) is reaching an extreme level. A rally is then due.

• Pivot high: A high, with a lower high on either side of it.

• Pivot low: A low, with a higher low on either side of it.

Positive Divergence: Occurs when the price makes a new low, but the indicator does not i.e. setting up a divergence between the price and the indicator. Bullish.

Relative Strength (or ‘Ratio’) Analysis: comparing one market or stock to another to see which is outperforming on a relative basis. Not to be confused with Relative Strength Index (RSI).

Resistance: A level above the market where selling is greater than buying (i.e. supply).

• Reversal Bar (Day): Occurs when the price makes a new high (low) relative to the previous price bar’s high (low), but then reverses and closes below (above) the previous bar’s close. Typically signals a change in trend.

Reversal candlestick: Typically (bullish) when the price opens low or unchanged, then weakens, but rallies strongly into the close e.g. hammer, bullish engulfing pattern, piercing pattern. Vice versa for bearish signals e.g. shooting star, bearish engulfing pattern, dark cloud cover.

Risk-Reward ratio (good): A trade where the potential profit is at least 3x the potential loss.

Selling short (or ‘shorting’): Expecting prices to drop, so selling first and buying-back later.

Short position: A trade where one has sold short (as above)

Shooting Star (candlestick) – A candle that suggests a minor (at least) reversal. The body of the candle is near the low, and the line has a long upper ‘tail’.

Spot Price: the price of the underlying instrument itself i.e. not the futures price.

Support: A level below the market where buying is greater than selling (i.e. demand).

SSFs: Single Stock Futures.

Stop-loss: point where you close the trade if it moves against you - to protect yourself.

Time frames: (approximately) Short-term: 0-6 weeks; Medium-term: 2-5 months; Long-term: 1yr + (for purposes of TheMarket.co.za analysis report).

Trailing stop-loss (or ’trailing a stop’): moving the stop in the direction of the market to lock-in profit e.g. a breaking of prior day’s high/low, or a percentage retracement of the current move (e.g. 50%), or the breaking of a moving average e.g. 10-day MA for the short-term, or 50-day MA for medium-term.

Weekly close: the closing price on Friday afternoon.

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DISCLAIMER:

Information for stock and index observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the stock/index/commodity/or currency observations, and opinions are entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. The information provided here is for interest and educational purposes only, and does not constitute advice. The editor and publisher will not be held responsible for losses incurred as a result the opinions expressed herein. All information herein is based on opinion; markets follow their own course. You must assess the risk of any trade and make your own independent decisions regarding any securities mentioned herein (or options thereon). We will from time to time have a position in the securities described herein. One should always use protective stops on all trading and investment positions. There is a risk of monetary loss in trading and/or investing on the financial markets.

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