C on tents :
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:
“If you personalise losses, you can't trade.”
Introduction:
The JSE and world markets have either bottomed already, or will make a final bottom for this correction, in the next few days I believe. A weak close on the JSE All Share Index today (if we get one) will point to another minor leg down. But I believe downside is limited and it's doubtful whether we'll break recent lows if we do get another sell-off. The sign to look out for will be a strong weekly closing price, to signal to end of this correction. That may only happen next week. Either way we are oversold on daily and many weekly charts, which to me indicates a bottom is either at hand or very near. The big picture is still positive. We start with an update of the S&P 500 index in the US which is showing some definite bullish signs. Likewise for the chart of the JSE All Share index. We also show charts of the JSE Gold index that has given a classic reversal up off support, and the JSE Resources
20 index that has dropped to reach a 12-month support level. The stock charts shown are Exxaro
(bullish signs), SABMiller (oversold), and ARM (becoming a low risk buy).
The small-cap chart is Chemspec, which has higher targets.
Overall, we may well get one final leg done here on the JSE as the All Share drifts to the low of today's range in late afternoon trade (Weds). I expect that to be the last dip for this correction. The focus therefore, should be on looking to get long again for traders.
Executive Summary:

S&P 500 (chart 1): Traders buy on an intraday break above 1105.

All Share Inx (chart 2):

JSE Gold Inx (chart 3):
Traders buy at current levels or better for a new rally. Investors hold.
Buy at current levels or better for another rally.

Resi 20 Inx (chart 4):

Exxaro (chart 5): Prepare to buy.


ARM (chart 7):

Buy on either a close above R174.20 or a retest of R165.70 level.
Chemspec (chart 8):
Traders re-enter resi stocks, with caution initially.
SABMiller (chart 6): Low risk buy
Buy on weakness to 85c or lower.

Leading Stocks (3-mths): Top 40 – Kumba-IO, Exxaro, Richemont, Lonmin, Shoprit,
Implats Resources 20 - Kumba-IO, Northam, Mvela-Res, Metorex, Exxaro.

Shortable stocks/indices: 9 stocks, 0 index, 0 commodities, 5 currencies.
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S&P 500 INDEX – Bullish signs building
Broad Recommendation: TRADERS LOOK TO BUY. INVESTORS HOLD.
Trend: Short-term technically down, but oversold. Med-term sideways. Long-term up.
Strategy: Traders buy on an intraday break above 1105.
Chart 1. (Daily)
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OVERBOUGHT
OVERSOLD
Sto chastic Oscillator (27.12 23)
POS DIVERGENCE
I-SP500 (1,090 .05, 1 ,104.7 3, 1,0 87.96, 1,103 .32, +14.13 99)
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Chart Setup: The S&P gave a reversal candle up last Weds (see first circle) although not classic, it failed as the price broke below line 1. On Monday this week it gave a good reversal candle up (called a
'bullish engulfing' candle) (see second circle). So far we are having follow through to the upside.

The short-term Stochastic Oscillator (on top) is giving a positive divergence (see Glossary) from its oversold level, which is an early warning of a rally to come.
Strategy Details: Traders buy on an intraday break above 1105 (spot price), with caution initially.
More conservative traders though should wait for a close above line 3 (1104) to buy.

Investors keep holding US and overseas stocks.
Target: Lock in some profits at 1120, and use a braking of its prior two-day low as your trailing stop
(see Glossary). Take more profits at 1135. The price can go all the way to its January high of 1150 in the short-term. The larger target (more med-term) is still to over 1200.
Stop loss: Initial stop is a close below 1082 (spot price). Once the price gets to 1120 use a breaking of its prior two-day low as your stop.
Note: There is a chance we have another (minor) leg down from the 1120 level, to retest Friday's low, but that's looking increasingly unlikely.
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JSE ALL SHARE INDEX – Nearing a bottom
Broad Recommendation: TRADERS BUY (WITH CAUTION INITIALLY)
Trend: Short-term technically down, but oversold. Med-term sideways. Long-term up.
Strategy: Traders buy at current levels or better for a new rally. Investors hold.
Chart 2. (Daily)
OVERBOUGHT
Re lative Streng th Ind ex
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Chart Setup: The index fell close to line 1 support and has formed a small falling wedge (lines 2 and
3) over the past week. This pattern has bullish implications. Yesterday the price broke out above line 3 to trigger a buy signal.

The daily RSI (on top) is giving a positive divergence (see Glossary) from its oversold region, which is warning of a rally to come.
Strategy Details: Trades re-enter (buy) at current levels or better, with caution initially. The only question is whether we reversed down again from line 4 for another (final) leg down, or whether we continue straight up to a new recovery high. Therefore, tighten trailing stops as we get to 27 300 (i.e. near line 4) to a breaking of its prior two-day low. If we get a clear reversal day/candle down off line 4 then short-term players only, sell short, with caution. (Line 4 is at 27 410 on Weds 3 rd and declining at an angle of 60 pts per day thereafter).

Investors hold regardless.
Target: Look for a move to 27 350 initially at/near line 4. If we can break through line 4 and stay there for two days it should setup a minimum target to 28 400 and most likely to a new recovery high, and on to 29 500. We've have had a target of 30 000 for the past 9 months.

Note, if we do reverse down off line 4, then look for a final drop to line 1 at 26 200 to buy on a reversal day up. But a strong close to this week will be bullish for a continuation all the way up.
Stop-loss: Initial stop is a close below 26 480. If we get a reversal day down off line 4 to sell short on, place stop above the high of that reversal day. iii
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JSE GOLD INDEX – A reversal off support
Broad Recommendation: BUY
Trend: Short and med-term technically down, but oversold. Long-term sideways.
Strategy: Buy at current levels or better for another rally.
Chart 3. (Daily)
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OVERSOLD
Sto chastic Oscillator (11.67 34)
POS DIVERGENCE
JSE-GOL D (21 .9500 , 22.73 00, 2 1.9500 , 22.4 200, +0.470 00)
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Chart Setup: The gold index formed a classic reversal candle (see circle) on Monday, (called a
'hammer'). This occurred at line 1 support, which gives it more significance.

The daily Stochastic Oscillator (on top) is giving a positive divergence from its oversold level, which is warning of a rally to come.
15
Strategy Details : Buy gold stocks at current levels or better, for the start of a new uptrend.
Target: Look for a move to line 2 initially (2400 level). Once it can break line 4 on a closing basis, look for further upside to 2550, and potentially 2620 on this index.
Stop-loss: Initial stop is an intraday breaking below 2130 on this index. Once the price gets to line 2, use a breaking of its prior 2-day low as your trailing stop (while locking in some profit there). But reenter on a close above line 2. (The exact level of line 2 is 2451 on Weds 3 rd and declining at an angle of
7pts per trading day thereafter). iv
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JSE RESOURCES 20 INDEX – Testing important support level
Broad Recommendation: TRADERS BUY. INVESTORS HOLD.
Trend: Short-term technically down, but oversold. Med-term sideways. Long-term up.
Strategy: Traders re-enter resi stocks on weakness, with caution initially.
Chart 4. (Daily)
2
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Sto chastic Oscillator (17.28 96)
JSE-RES20 (47 2.190 , 487 .650, 4 72.19 0, 485 .380, +13.1 900)
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Chart Setup: The resi 20 index has fallen to line 1 support, which is a 12-month support line. Line 1 has been tested a few times or near-tested, and has held each time (see circles). The odds favour it
3 holding again. The 200-day moving average is also slightly below line 1, providing further support nearby.
1

The short-term Stochastic (on top) is oversold (and giving a positive divergence). The odds favour a good rally from present. The only questions is whether we head straight back up, or if we have a relief rally and then a minor leg down to retest Mondays low.
Strategy Details: For now, traders should buy large-cap resi stocks (or the SatrixRes) at current levels or better. Once the index gets to 50 400-51 000 tighten your stop for traders to a breaking of its prior two-day low. (Current level of this index is 48 600). If we don’t reverse down from that zone then expect a rally all the way back to new recovery highs at line 2 (56 000 level).

But a clear reversal candle down from the 50 500 area can be shorted by short-term traders only.

Investors hold resi stocks regardless.
Target: A rally to 50 400-51 000. If we can move through there without a reversal down, then look for the rally to continue up to line 2 at 56 000. If we do get a reversal down from that zone, look for a drop to line 1 at 47 000 to buy again.
Stop-loss: The initial stop is a close below 46 800. Once we get to 50 400 tighten your trailing stop to a breaking of prior two-day low. Note: A strong close to this week e.g. above 49 100 (this Fridays close) will be a reversal week, and point to us heading all the way back up. v
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EXXARO (EXX) – Bullish signs
Broad Recommendation: TRADERS PREPARE TO RE-ENTER (BUY). INVESTORS HOLD.
Trend: Short-term technically sideways, despite current correction. Med and long-term up.
Strategy: Buy on either a close above line 3 or a pullback to line 2 - first to happen.
Chart 5. (Daily)
Sto chastic Oscillator (29.71 36) OVERBOUGHT
OVERSOLD
POS DIVERGENCE
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EXXARO (103.9 50, 1 05.030 , 103 .120, 1 05.00 0, +3 .00000 )
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Chart Setup: Exxaro broke out of a large broadening formation in December. Its rally stopped just short of its minimum target. It has now pulled back to line 2 and its 50-day moving ave (i.e. providing double support there) at R100.50.

In addition, the short-term Stochastic (on top) is giving a positive divergence (see Glossary) from its oversold region, which is a warning of a rally to come.
Strategy Details: The only question in my mind is whether it will rally straight back up to new highs or if we'll get one more pullback after a minor relief rally. Either way, buy it on a close above line 3 or a pullback to (and reversal day up from) line 2 (R100.50 level). Do whichever happens first. (Line 3 is at
R106.30 on Weds 3 rd
and declining at an angle of 70c per day thereafter).
Target: Back to the January highs (line 4) initially at R114. Lock in half profits there. And continue with a breaking of its prior two-day low thereafter as your trailing stop. R116.50 seems like a likely target to take all remaining profits for traders.
Stop-loss: Keep a wide stop initially as a close below R100 regardless of whether you buy on the breakout above line 3, or the pullback to line 2. Once the price gets to R110, move your stop up to a close below R103.50. Once it gets to R113, use a breaking of its prior 2-day low as your stop and take at least half profits at the R114 target. vi

SABMILLER (SAB) – Low risk buy
Broad Recommendation: TRADERS PREPARE TO BUY. INVESTORS HOLD.
Trend: Short-term down but oversold. Med-term sideways. Long-term up.
Strategy: Buy on either a reversal up from line 1, a break above line 2, or a close above line 3.
Chart 6. (Daily)
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Sto chastic Oscillator (43.20 89) OVERBOUGHT
OVERSOLD
SA-BREWS (20 9.500 , 209.500, 2 04.48 0, 205 .000, -3.370 00)
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Chart Setup: SAB has been consolidating for a few months and is setting up another good buying opportunity I believe. Line 1 is providing medium-term support at the R202/R200 level.

What I really like about SAB is that its Stochastic is oversold on its weekly chart (not shown). It is also relatively oversold on the daily chart.
Strategy Details: Your entry will be based largely on how aggressive you are as a trader. There are three options: 1. Buy on a retest of line 1 (R202) and reversal day up from there. 2. Buy on an intraday break above line 2 (R210.90). 3. Buy on a close above line 3 (the most conservative of the three). (Line
3 is at R216.45 on Weds 3 rd
and declining by 25c per day thereafter).

Investors hold regardless.
Target: A close above line 3 will be the final confirmation of the correction having ended. Expect a move up to retest its all time high of R226.30. No harm in locking in partial profits there (e.g. a third).
But expect further upside to R235 and then R250 eventually (med-term).
Stop-loss: Initial stop if buying off line 1 or on the break above line 2, is a close below R200. If buying on a close above line 3 place your stop as a close below R208.50. vii
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ARM (ARI) – Oversold
Broad Recommendation: PREPARE TO BUY
Trend: Short-term sideways, despite recent correction. Med and long-term up.
Strategy: Buy on either a close above line 3 (R174.20) or a retest of line 1 (R165.70 level).
Chart 7. (Daily)
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Sto chastic Oscillator (14.94 09)
OVERBOUGHT
OVERSOLD
AR M (170 .000, 172.9 50, 16 7.160 , 170.000, +3.020 00)
200 MINIMUM TARGET
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Chart Setup: ARM is still pointing to a higher target from a large ascending triangle breakout (lines 1 and 2) in December. It has pulled back in the past two week to retest line 1.

The daily Stochastic (on top) is oversold, a bullish setup.
Strategy Details: Traders buy on either a close above line 3 (R174.20) or on a retest and reversal day up from line 1 (R165.70/R166 level). Do whichever happens first.
Target: The larger target is still R198 (med-term) i.e. the height of the large triangle projected up.
Short-term, a close above line 3 will setup a short-term move to R183.60.

Depending on your trading time frame, start locking in some profits at the 184 level and use a breaking of its prior two-day low as your trailing stop. Pullbacks will remain buyable. Med-term players keep holding though to the R198 target.
Stop-loss: Initial stop is a close below R165. If stopped out, look to get straight back in on the first reversal day up thereafter. Trailing stop is as mentioned above. viii
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CHEMSPEC (CSP) – Higher targets
Broad Recommendation: BUY ON WEAKNESS
Trend: Short-term up. Med-term sideways. Long-term up.
Strategy: Buy on weakness to 85c or lower.
Chart 8. (Daily)
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SHLDR
CH EMSPEC (0 .9000 0, 0.92 000, 0.890 00, 0.9 2000 , +0.02 000)
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HEAD
No vembe r 200 9 Feb ruary Ma rch April Ma y Jun e Jul y Aug ust Sep temb er No vembe r 201 0 Feb ruary Ma rch April
Sector:
Ma y Jun e Jul y Aug ust Sep temb er
Chemical Specialties Current Price: 90c
Chart Setup: Chemspec has formed a large inverse head and shoulders pattern (as labelled). It's not classically formed but still looks ok. In the short/med-term it has broken out of a symmetrical triangle
(lines 2 and 3), which has a higher short-term target.

The Stochastic (on top) has further to move up, but on a more med-term basis.
Strategy Details: Ideally look to buy on a minor pullback to 85c or lower. To ensure you have a line in, there's no harm in buying part of your positions now and the rest on a pullback.
Target: Target 1 is R1.02 i.e. the height of triangle 2-3 projected up. That will be about a 15% profit.
Traders can exit there and continue buying on pullbacks. But longer-term players hold for the larger target (Target 2) at R1.62, which also coincides with the prior all time high for this stock (line 4) in
April 2008 (This is based on the height of the inverse head and shoulders projected up).
Stop-loss: Initial stop is a close blow line 2 i.e. below 80c. Once we get to 99c use a breaking of its prior 3-day low as your trailing stop for traders only. And take profits at Target 1 (1.02). Longer-term players keep holding thereafter, but expect normal corrections as it makes its way higher over time. ix

Other small-caps of interest (alphabetically): (shares to consider on a pullback)
Long: Octodec, Verimark.

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: Kumba-IO, Exxaro, Richemont, Lonmin, Shoprit, Implats, Stanbank.
Strongest five Resi 20 stocks: Kumba-IO, Northam, Mvela-Res, Metorex, Exxaro.
Resi 20 vs. Findi 30 over 3-months: Findi 30 stronger.
Concerning last newsletter’s index stock charts:
Gfields: gave the reversal candle up on Monday from our mentioned buying level. Hold/buy on any pullback towards 88 if we get one. It needs to close above 93.70 to break its short-term downtrend. Targets are 103. 110, and eventually 115.
Kumba-IO: triggered the buy signal. Take at least half trading profits at 33. And continue with a breaking of its prior 2 day low thereafter as your stop. Potential to 345. Move stop up to a close below 114.
Vodacom: keep holding. Targets are R57.90, with further potential to R59.50.
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):

Imperial, Naspers, Harmony, Netcare, Anggold, Old Mutual, Billiton, Lonmin, Anglo,
Angloplat, Implats, Sasol, Steinhof, MondiPlc, Foschini, Northam, Sanlam.
Abil: no change. It's still in no-man's land between support at 28 and resistance at 30.50. Wait for it to get close to either of these boundaries before putting on a trade for a reversal to the other boundary. It needs to close above 31 to get going. x

Absa: has got to the trading target for a nice profit. Look for a pullback to 130.50 to buy on a reversal day up. Stop will be a close below 130.50. If it does close below 130.50 it will setup a drop to 126 but shorting it is not advised because it's in a solid uptrend. Investors hold. Larger target is
148.
Altech: no change. Has had a good run in recent weeks. It still has a med-term target of 84. The best strategy is still to keep it as a med-term hold. A pullback to 75.50 can be used for buying if not in.
Altron: Hold, with stop as a close below 26.40. Med/longer-term target to 43.70. A close above 29 will setup a rally to 33.
Anggold: it triggered the stop as it broke through med-term support. After falling sharply it gave a classic reversal candle up on Monday. If you were stopped out, look to get back in on any weakness. It needs to close above 282.30 today (declining by R2 per day) to break its downtrend. , but it is oversold on both daily and weekly charts which is a good sign. Keep a wide stop initial as a close below 260. Target will be back to 330-340.
Anglo: continued straight down with no reversal day up to buy. But it's now looking much better after giving an island reversal pattern in recent days. If it can close at the 300 level on Friday then we'll have a reversal week and that should confirm the end of this correction officially, in my view, and a confirmed buy signal. In the meantime if we get a pullback towards 280, use it to buy. There is resistance at 314 and again at 322. We might get a minor pullback off either level, but that will be a buying opportunity. Look for it to make its way back up to 350 and most likely higher (medterm).
Angloplat: buy on a close above 733 or a pullback to 70 – whichever happens first. It is oversold.
Its main support level is 680. Keep your stop as a close below 700. Target back to 815.
ArcMittal: last Weds was a nice reversal candle up. If you bought, hold. Otherwise, traders buy with caution on any 1-2 day pullback from current levels. Stop is a close below 102.50. It's moved sideways over the past week. Once it can close above 110.50 it will setup a move to 115. Larger target is 130.
ARM: see Chart 7.
Aspen: has been edging up over the past week. My only short-term concern is maybe another minor down leg to test the recent low of last week. Keep your current stop for traders a close below 65. If stooped out look to get straight back in on the next reversal day up. Lock in partial profits at 72 and the rest at 74 for traders. Investors keep holding.
Aveng: it gave a reversal candle up last Friday but has a lot of work to do to break its downtrend. It is oversold. The strategy is to sell short a rally to 38 and reversal down from there, for a drop to
34.40. If no reversal down occurs, its main resistance level is 39.30. It needs to close above there to break its downtrend for buying again.
Barworld: the short-term trade will have been stopped out for a small loss. It gave a nice reversal candle up yesterday. But it needs to close above 44.90 today (declining by 30c per day) to trigger a new buy signal. Target then will be 48. Stop a close below 42.50.
Basread: no sign of a reversal up here yet, the only potential positive is that it's now close to a major support level at 10.20. There is a very good chance of that level holding. And it's very oversold. Needs to close above 12.25 to break its downtrend for buying.
BATS: it has continued down in recent days. It has support at 242, which is where I'd like to buy it
(on a reversal day up). Stop will be a breaking of the low of the reversal day or a close below 241.
Target to 254.
BHPBilliton: continued straight down giving somewhat of reversal day up on Monday, yesterdays follow through was very positive. Its overall with a positive divergence on its chart on the oscillators which is all very bullish. Like Anglo, my only concern is that we might have one more minor drop to retest recent lows, but a strong close on Friday e.g. at 234 or higher will be reversal week and most likely signal the end of this correction, for buying with more confidence. In the xi

meantime, traders can buy, but with caution initially. Keep a wide stop initially as a close below
221.50. There is short-term resistance at 238.50 and 242 for locking in a bit of profit at each. A strong close on Friday will setup a move back to recovery highs at 257.
Bidvest: is moving up nicely towards its trading target of 134.50, from its recent buy signal here, off support. Its showing good relative strength in general. Investors hold.
Datatec : yesterday stopped just 1c short of our 31 target, which is close enough to take the profit.
Look for a pullback to 28.15 if you want to re-enter. Med-term upside potential to 34.
Didata: keep holding. It's doing well as it moved to 10.10 its trading target. If not in, it can still be bought if it gives a pullback to 9.50 in the next day or two.
Discovery: buy as close to 3.40 as possible. Stop is a close below 30. Target to 32.50 in the shortterm. It needs to close above that level to give another buy signal for a rally to 34.90. Investors hold.
DRDGold: aggressive traders who bought last week will have been stopped out. It is very oversold, so buy again on either a pullback to 4.40 or a close above 4.65 – whichever happens first. Stop is a close below 4.15 initially. Target is 5.50-5.70. Med-term target is 7.30. Note it is a highly speculative share at the best of times, so no large positions advised here (ever).
Exxaro: see Chart 5.
Firstrand: traders buy as close to 18.20 if not in. Stop is a close below 18. A close above 18.70 will take it to 19.25 at least. Larger target is 23. Investors hold.
Foschini: triggered the mentioned buy signal. Keep the stop as a close below 53. Target is 58.60 initially for locking in some profits. It can close above there then re-enter that part of your position for more upside to 65 med-term. Investors keep holding for now.
Gfields: see update above.
Grindrod: its oversold and can rally back at any time but I'd like to see some sign of a reversal before buying, e.g. a nice reversal week back up. In the meantime it can still make its way to 13.70, but is getting oversold on the weekly chart. And will provide a buying opportunity again fairly soon, but caution still advised for now.
Group-5: is till trending down and has good support at 29.30. It's also oversold with positive divergences, but because it's in a downtrend no buying advised as yet. The strategy is to short the bounces e.g. to 33.50, for a recent of recent lows. If we get a reversal day, and ideally a reversal week up from 29.40 then it will be worth looking at for some buying.
Harmony: gave the reversal day up on Monday for buying. A close above 74.90 will be a further positive development to take it to 80-81.80 initially. Thereafter to 85.30. In the meantime any minor pullback to 72 or lower can be used to buy if not in. Stop is a close below 68.70 initially to give it some space to move.
Imperial: I like the look of it, particularly on its weekly chart. Buy some now, with your stop an intraday break below 76.50. If stopped out, get back in on the first reversal candle up. There is as chance we get a minor selloff to retest its recent lows, but med-tem for sure its low risk. Target to
91.50.
Implats: a reversal candle last Weds was ignored as it continued up. Yesterday it gave a stunning reversal back up, catching a lot of people short I believe (a bullish event to push it higher as they cover their shorts). Buy on either a close above 201, or a pullback towards recent lows e.g. at 193 or lower. Stop is a close below 189. A bullish close to the week e.g. at 203 or higher will confirm the end of the correction and allow for buying with more confidence. Target then up to 235.
InvPlc: keep holding. Stop is a close below 50.30. A close above 53.30 will be bullish to take it to
55.30 at least, for bung if not in, and quite possible to 57.30.
Kumba-IO: see update above.
Lib-Hold: is still in a large sideways pattern. Take trading profits at 69.50. Needs to close above 75 to give a convincing breakout. It's a low risk buy at the 64 level.
Lib-Int: its currently testing support at the 55.20 level. Hold if in, with your stop a close below 55.
It did give a reversal candle up yesterday. More aggressive traders can buy if it breaks yesterday's xii

high of 55.56. Keep the same stop as a close below 55. Lock in some trading profits at 58.20 and raise your stop to a breaking of prior 2 day low. But a close above 58.50 will take it back to 62 for more profit taking.
Lonmin: triggered the mentioned buy signal yesterday. Hold if in. It needs to close above 233 to get going as its formed a small sideways channel over the past week. Once that breakout occurs it will setup a move to 247 and eventually to 260. In the meantime, if we do get a pullback towards the bottom of its short-term range (i.e. 217.50) that can also be used to buy. Stop is a close below
217.
M&R-Hld: has given a good really in recent days and a close above 41.70 will be a positive sign, and can be bought by aggressive traders then, with caution. Target to 45. Ideally I'd like to see a strong finish to the week, closing at the 42 level. If that happens, one can have a nibble with more confidence. I need to close above 45.50 to break its downtrend.
Massmart: is heading back towards solid resistance at the 91-92 level. It's an untidy pattern and profit taking to be down there if in. Until it can breakout and close above 92 for a couple of days, look to only buy in on weakness to 85 or lower.
Merafe: traders lock in half profits at 1.37. A close above 1.38 will be a new upside breakout for re-entering what you sold. Target then will be 1.49.
MondiPlc: hold if in. It has a target of 48.80. Stop is a close below 42 for traders only. If not in, buy on a close above 43.20, which will result in a sharp rally. Med/longer-term players hold to a larger upside target of 53.50. Main support is 39.70.
MrPrice: is moving nicely towards its short-term target of 36.80 for a nice trade so far. There is some resistance at 36 but it's likely to get broken. Further upside potential to 37.50. In the meantime if we get a pullback to 34.20 that can be used to buy more. Investors hold.
MTN-Group: is moving sideways in recent weeks and quite possibly forming a base from which to move up from. A close above 110.20 will be a buy signal, or buy on a reversal day up from the
106 level or lower. On a med-term view I believe it is cheap. Target for a rally is 117.80. Once it can close above there, expect a move to 133.
Naspers-N : gave a classic reversal candle up on Monday from our mentioned buying level. If not in, buy on a close above 278 today (falling at an angle of R1.50 per day) – or on any retest below
270 if we get one. A close above 278 will setup a move to 292, and then on to 303. Med-term look for at least one more big up leg to over 310.
Nedbank: moving sideways in the short-term. Hold. Stop is a close below 118.50. Lock in some profits at 125 and the rest at 127.50.
Netcare: gave the reversal day up from mentioned support to buy. If not in, you can still buy it.
Target to 14-14.20. Stop is an intraday break below 12.30. Investors keep holding.
Newgold: triggered the mentioned by signal. Yesterday it gave a further upside breakout for buying. Hold. Stop is a close below 79.80. Target to 84.25 in the short-term for locking in partial profits. But a close above there will be a further buy signal for a rally to 88.20. It's forming a potential short-term inverse head and shoulders.
Northam: hold if in, otherwise buy as close to 48.50 as possible. It's oversold. A close above 52.10 will also be a buy signal for more conservative traders. That will setup a move to 56.50 initially.
And then 57.70 for traders. Pullback will be buyable on an ongoing basis for traders. But med-term players should hold. Larger target is 70.
Old Mutual: I like the look of this chart at the moment. Traders buy on a close above 12.70. Stop will be a close below 12.45. Upside targets will then be 13.70, 14 and eventually to above 15.
Investors hold. It still has a larger target of 18. It remains to be seen if it will be reached.
PicknPay: is in med-term sideways pattern. A close above 40.50 will be a new buying signal for a move to 42.80-44.
PPC: moving sideways in recent weeks. Traders exit it at the 34 level as there's no clear direction here right now. Any drop to 31.50 can be bought though. Stop is a close below 31. xiii

Reinet: is in a short-term sideways channel. If in hold, with your stop a close below 11.50.
Otherwise wait for a close above 12 (safer option) will take it to 12.40, for profit taking.
Remgro: A close above 90.50 will be a signal to go long (buy) again. This may well happen today
(Weds). Stop will be a close below 88.50. It is also a low risk buy near 88.50 in the meantime.
Targets still 93.70 and eventually 97.50.
Reunert: only buy on a close above 57.50. Target will be 62.50. And stop a breaking of the low of the current correction (which currently is 54.13). Longer-term potential to 77.
Richemont: keep holding, it's a good looking chart. At 25.50 it's a low risk buy if not in. Current stop is a close below 25.35.
Target is 27.20-27.50. It has a larger target of 28.10 given here in July
'09.
RMBH: hold. Stop is a close below 29.80 for traders. It needs to close above 30.90 to get going again, to 31.90. Investors hold. Larger target is 37.
SABMiller: see Chart 6.
Sanlam: Hold. Minimum target is 24.10 for traders. Any pullback to 22.70 can also be bought. Stop is a close below 22.50. Investors keep holding. Target is 25.
Santam: has continued down sharply over the past week but is still in an uptrend and is now very oversold. Hold if in, otherwise buy on a close above 102.80 or a reversal up from 95.30. Do whichever happens first. Target is 110-113. Stop is a close below 94.
Sappi: triggered the mentioned buy signal. Hold.. If not in, buy on a close above 32.90. Once that happens it should start moving up nicely. Target will be 35.60 initially. And then up to 37.90. Medterm targets are above 40 and then to 45.
Sasol: has given some reversal days up in recent days to buy as advised. It's not out of the woods yet though and a close above 292.75 will be more convincing to get it going. Hold with your stop a close below 278.50. Upside targets are 301.50 and 303 for locking in profits at each level. Medterm to 315. Note, if stopped out if we get another sharp dip on the market, look to re-enter on the first reversal day thereafter from the 278 level.
Shoprit: this star performer raced through the upside target for traders giving another good profit.
Take short-term profits if in (or at least partial profits and buy again on a dip to 68.30 or lower.
Investors hold.
Spar: another nice trade going on here. Lock in some trading profits near 72, but a close above
72.05 will be a re-entry signal for a rally to 76.20. Any pullback to 68.50 is also buyable. Stop is a close below 68. Investors hold.
Stanbank: has stopped just 15c short of the 109 target so far. Lock in some trading profits on an intraday break of 106.50. Exit the rest of the position if it closes below 103.30. Short-term support is 103.30. Investors hold. The larger target, given here in June '09 is still 120.
Steinhof: triggered the short-term stop but then gave the reversal days up on Friday and Monday to re-term as advised if it was stopped out. If not in, buy on a close above 20.30. Target is 21.50-
22.40. Stop is a close below 19.20. Investors keep holding for a move to over 25.
Telkom: triggered the mentioned buy signal. Hold, with caution, with your stop a close below
32.50. No large positions. Lock in half profits at 35, and more at 35.60.
Tigbrands: hold if in, otherwise buy on either a close above 178.20 or a pulling to 173.50 – whichever happens foist. Stop is a close below 173. Once we get the close above 178.20 it will setup a move to 188.80.
Truwths: triggered the mentioned buy signal from last week. Target is 44.50 and potentially 46.
Investors hold. Stop is a close below 41 for traders. Its oversold on the weekly chart.
Vodacom: see update above.
Woolies: keep holding. It is doing nicely but is getting a bit overbought in the short-term. I think the best strategy here is to hold it to 19.50 (short/med-term) and use minor pullbacks to buy more.
But no harm in locking in portion of trading profits above 18.50 just to reduce your overall risk.
Main support level is 16.95. xiv

GOLD UPDATE: For detailed commentary on the JSE gold index please see Chart 3.
Dollar gold price : reversed off the mentioned $1080 level exactly which was a good chance to buy. It is oversold on daily and weekly charts as mentioned last week. I'm expecting a big rally here in the next
4-6 weeks. A close above 1120 (spot) which is a resistance level, will be the important breakout to get it going further (and another buy signal). Look for a rally then to retest it's all time high of 1212 and most likely exceed it. Larger target still is $1350. In the meantime keep a wide stop as a close below 1078.
Any pullback near there if we get one will be another buy chance.
Rand gold price: a close above 8285 will be new short-term breakout for buying. That will take it to
8540. A close above 8550 will be a further buy signal to take it to 9100.
Please note:

We list the stocks and indices (local and overseas) that are in short-term (at least) downtrends, and that can be sold short (see Glossary for definition) on rallies to resistance.

Selling short can be done via single stock futures, CFDs, spread trading, and/or put warrants.

One way of trading these stocks/indices is to sell short rallies to the falling 20-day moving average
(in stronger downtrends) or the falling 40-day moving average (in more gradual downtrends). These moving averages tend to act as resistance. Wait for a downward reversal at the moving averages before selling short.

NOTE 1: ALWAYS USE PROTECTIVE STOPS ON ALL POSITIONS. Selling short is for shortterm traders only, and all positions must be monitored closely.

NOTE 2: The instruments on this list are not automatic shorts, but it is a starting point for looking.
Always look at the chart first before making a final decision.
Shortable Stocks: (as of 27 Jan. ‘10) Price (R) 20-Day MA: 40-Day MA:
ARGENT
AVENG
GRINDROD
8.3500
36.0000
14.7400
8.8625
37.7730
16.5580
9.0325
38.3695
17.0130
GROUP-5
GROWPNT
JSE
LIB-INT
M&R-HLD
PPC
31.6000
13.7800
57.5100
55.3000
41.2000
32.8000
34.6595
13.9035
58.2760
57.8220
42.8520
33.7340
35.3848
13.9122
59.1280
58.2760
44.1678
33.8855
Shortable Indices/Currencies/Commodities: Price
C-EUR-$ 139.1000
C-EUR-GBP
C-EUR-YEN
C-EUR-ZAR
C-GBP-ZAR
87.2000
126.4000
20-Day MA: 40-Day MA:
142.2250
87.9880
129.4800
143.6125
88.8142
130.3125
1044.0900 1064.0355 1075.0072
1190.0200 1207.8199 1208.6395 xv

While there are many bullish signs coming in on the main indices and stocks, e.g. positive divergences from oversold levels, as well as weekly charts getting oversold, we are not completely out of the woods yet. It looks like we'll get another dip, probably to retest recent lows. But from there I believe downside will be very limited.
The sharp reversal up on the gold price recently is a good sign, both for it and for the stock market in general (that has tended to rally on a weakening dollar).
As a result, the emphasis should be shifting to buy again for traders. Investors to continue holding stocks as they have been advised all along.
Finally, look to the weekly charts of the main indices for a weekly reversal/candle to signal the final end of this correction.
Sincerely,
Colin Abrams
TheMarket.co.za
PS: Remember: Protective stops on all positions!
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GLOSSARY OF TERMS USED IN
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.
xvii


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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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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