Stocks in play 31 January 2022

The week started with a strong sell off, following the US markets taking a dive. The S&P closed below the 200 day EMA for the first time since 2020. Our market followed suit. But then we had a sharp almost immediate recovery. S&P coming back above the 200 day EMA

The MPC announced another 25bps rate increase when they met on Thursday. The market expected the 25bps increase. You could see that by how the banking stocks were acting from Tuesday after the Monday sell off. The banks began the rally after the announcement. Most breaking short term resistance.

Resources have been building a rally, oil continuing its run, benefiting Sasol and MTN. Its been a generally good week for resources.

ZAR showing some weakness. Looks like it’s headed towards R16 and perhaps breaking through this level.

This should boost commodity stocks and companies with hard currency revenue exposure

Top 40

Back in 2020 we had an ambitious target of 72.5K from a head and shoulders pattern. We’re now only about 7% away from that target. WIth the weakening rand we should hit this target in a few months or weeks. Nice reversal doji as the market tried to retest the R63.4k resistance.

Let’s have a look at this week’s stocks in play

Absa

We recently had a weekly golden cross. At the back of the MPC announcement the stock broke out of its box with a bullish engulfing candle. I raised my stop loss to R156.69. Raising my position to just above break even at +0.2%. The stock breaks to the higher box this week. I will raise my stop loss and add to the position.

Capitec

The stock was saved by the 50 day EMA. Capitec legged the group and is yet to rally post the MPC announcement. At least it stopped falling. There seems to be a topline resistance at R2008 level. I don’t expect that level to hold for too long. I’m gonna wait for the market to break the resistance. I will start building a position on the stock.

Discovery

The symmetrical triangle pattern play continues to work well. It is certainly boosted by Thursday’s announcement. There was a reversal of the doji candle as the stock bounced off the 50 day EMA. It proceeded to make a new relative high. There is an old resistance at R156. I think the market will react to it. When the market breaks this level I will raise my stop loss and add to the position

Investec

Investec is my second largest holding. It looked like I was going to get stopped out there for a moment. When the stock closed below the 50 day EMA. it came back with a 3 white soldiers pattern. Still waiting to see if it will hold R90. If the market breaks the that level. I will gradually raise my stop loss.

Firstrand

Firstrand held the 50 day EMA with reversal bullish engulfing candle. Looking well poised to complete and break out the head and shoulders pattern. I’m waiting for the R64.50 neckline to break. Then I will raise my stop loss to just below the 50 day EMA.

Nedbank

The stock made a new relative high close breaking a long term base at the back of the MPC announcement. I raised my stop loss to just below the 50 day EMA. There’s long term support/resistance R200. I’m expecting the stock to react at that level. When the market break this level I will add to the position.

Standard Bank

The stock broke the R148 resistance after bouncing off the 50 day EMA. I raised my stop loss to just below the 50 day EMA to R139.79

Rand Merchant Investment Holding

We have a nice ascending triangle pattern looking ready for a breakout. Just waiting for a close through R46.90. To consider it a buy, but I will instead raise my stop loss to around R44 , just below the the 50 day EMA

British American Tobacco

Continuing to rally, it had a pause this past week but ended the week strongly. There’s an old support at R667 which was touched when the stock made a new relative high. I’m expecting the market to react there again, but eventually break through. If it breaks R667 it’s a good buy. I will raise my stop loss to around R630 and add to my position.

Gencore

The stock had a sharp sell off. Buyers came in to defend the 50 day EMA. There was a bit of resistance on the prior rally around R84.30. I expect the stock to react but ultimately break through it. Commodity prices provide a fair bit of wind at the back. If the market breaks the R84.30 level. I will raise my stop loss to R78.90 and add to the position.

Sasol

There was a massive base breakout on Sasol this week. Boosted by the rally in oil price and a weakening rand. There’s a strong old support at R358. With the current momentum I expect the stock to break right through it. However, a reaction to retest R315 is on the cards as well. Above R358 there are far fewer stale bulls, meaning there’s gonna be fewer and more shallow draw downs on the share enroute to the new ATH above R651. It’s gonna take a while of course

MTN

I added to the position this past week. Now just over a third of my portfolio is on MTN. There’s still an overhead resistance at R175. But with oil prices running as they are MTN should benefit from that rally, and break right through R175. Then the next level where we might find some selling will be around R190.

Telkom

It’s been quite a challenge to hold the Telkom rally. The stock has particularly deep draw downs. Controversies don’t help the situation. However, I remain bullish on the stock. It held the 200 day EMA well with 3 white soldiers. I’m waiting for the stock to come back above the 50 day EMA, to rebuild a position on the stock.

Pepkor

Pepkor continues to hold the long term trend line. Steinhoff is still a risk, as they may sell some Pepkor shares to reduce the heavy debt pile. At this level the stock provides an excellent risk reward ratio. However I will only start to rebuild a position above R23.25 and keep my stop loss as wide as I can until the Steinhoff risk is reduced.

Shoprite

The retailer repelled from the 50 day EMA like it was a hot stove and went to flirt with the higher box yet again. I’m waiting for the stock to move to a higher box by breaking through R211, to add to my position. I will try to keep my stop loss below the 50 day EMA. The stock seems to respect this moving average a lot.

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