TECHNICAL ANALYSIS: JSE All-Share index trading in tight range

The JSE All Share index is currently trading in a tight sideways range in the short-term. This is offering trading opportunities in both directions until we get a breakout of this range, as shown on its chart below.

JSE ALL SHARE INDEX – Range bound

Recommendation: Hold new long/trade the boundaries

Current Trend: Down on all main timeframes, but all oversold.

Strategy: Hold from recent entry in its support zone. Trade between lines 2 and 3, or a breakout.

Chart Setup: The price dropped to its support zone at lines 1 and 2 to buy, as advised last week. This level (line 2 at, 50 033) needs to hold on a closing price basis.

• Its short-term Stochastic (on top) is oversold with a positive divergence, pointing to a rally.

(Daily)

chart

Strategy Details: Hold from its drop into the support zone. Otherwise, trade off the boundaries by shorting a reversal down from line 3 (52 720), and/or going long (buying) a reversal up from lines 1 and 2 (50 700-50 033, respectively). All signals to be executed on the alsi future.

• A close above line 3 (i.e. above 52 750) will be a breakout buy signal.

Target: For now, its range is bound between line 3 (52 720 level), and lines 1 and 2 (50 700-50 033). A close above line 3 i.e. above 52 750 will then target lines 4 at 54 750/55 000 for taking profits. (If it can break out beyond there, that would be extremely bullish).

• To the downside, a decisive close below 49 900 i.e. below line 2, would be extremely bearish, and target 48 000 initially, and potentially 46 100

Stop-loss: A closing price above line 3 for shorts from line 3; or a close below line 2 (50 033) for longs in the support zone. If it closes above 52 750, then use a close below 51 170 as the stop.  

  • Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author, or attend trading courses, please go to www.themarket.co.za

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