Sappi

Wind at the back.

There is a possible 6.8 Risk:Ratio setting up on Sappi’s monthly chart. The August candle is closing off with a bullish Engulfing candle engulfing July’s doji. As the stock holds an important long term support. With a long term stop loss of R36.30 and target of R100. Nice risk reward ratio if you have the patience. Risking about a 20% price decline for a possible 131% price rise. Now it’s just a matter of buying at the right time. Let’s look further.

Zooming in a bit into a weekly chart.

We have an inverse head and shoulders pattern setting up. The right shoulder holding the 50 week EMA as support. After recovering the March 2020 lows. A break above the R52.80 neckline will also be a break back above the 200 week EMA. Looking at a long term entry around the R53 area.

Looking at what’s happening now.

The weekly chart’s right shoulder is off to a pretty good start. A double bottom both 50 & 200 day EMAs holds is support. I started building a small position on the stock with a stop loss just below the 200 day EMA around R39. I’m waiting for a close above the R45.50 resistance to just continue building my position. To if I can’t continue to build a sizable risk controlled position on the way up. Hopefully if the stock reaches R100 I’d still have my position.

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