TECHNICAL ANALYSIS: JSE top 15 index downtrend to continue

The JSE financial 15 index has been battered in recent weeks, by a combination of a very weak local economy, as well as a very weak rand. Its chart is showing more downside to come unfortunately, before it finally bottoms.  

JSE FINANCIAL 15 INDEX – Downtrend not over yet   

Recommendation: Sell short (again) after a rally.

Current Trend: Short and med-term down. Long-term sideways.  

Strategy: Sell short fini stocks after a rally to 15 100 level.

Chart Setup: The financial 15 index is on its way down to 14 280, based on a breakdown of a large wedge (lines 2 and 3). It’s currently giving a relief rally (bounce), and then one more drop to come after this. 

• Its short-term Stochastic is oversold, which is still fairly bullish in the immediate short-term.  

• Elliot Wave analysis (labelled as roman numbers) shows the current bounce as a Wave-IV and points to one more drop (after the rally), to complete a Wave-V.  (There are five waves in an Elliot Wave sequence in the direction of the trend).

(Daily chart)

chart sharp

Strategy Details: Traders look to sell short large-cap financial stocks on a bounce to 15 100 on this index. (I’d like to see a reversal day down in that area to enter short).

  • Thereafter, we’ll be looking for a signal to go long financial stocks (especially banks) from line 1 (14 000) or lower. 

Target: A bounce to 15 100 level (or a bit higher), and then one final drop.  Line 1 support is at 14 000, which is a realistic downside target. 

Stop-loss: For shorting after a rally, the stop is a close above 15 500 Tighten it a lot as it nears line 1 (14 000).

  • 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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