Weekly Technical Analysis – 22 June 2022

  • South Africa 40 Cash Index

The gap resistance at 61340 in the South Africa 40 Cash Index was tested last week before the index fell again.

Since then, price has started to recover from the oversold area and from the support at 59150 before moving towards the gap resistance again.

Until we close above the gap resistance, our trend direction remains down.

Short entries will be considered if a bearish price reversal occurs before the gap resistance or on a break (confirmed by a close) of support at 59150.

If we instead see a close above gap resistance at 61340, we would re-evaluate the merits of a long trade with a conservative upside profit target.

Should either of these scenarios occur, we will update our forecasts with targets and failure thresholds accordingly.

Please note that the South Africa Cash 40 Index is adjusted for a dividend in the underlying, currently estimated at 25.7 points.

 

  • USD/ZAR

The USD/ZAR has entered a short-term consolidation after its recent rally. Consolidation for the currency pair is currently seen between the R15.70/$ (support) and R16.20/$ (resistance) levels.

Considering the aggressive previous rally/uptrend, traders may prefer a long position in the currency pair for now and wait for either a bullish reversal from the R15.70/$ support or a break above the R16.20/$ resistance to enter.

Should the R15.70/$ support be breached, we would prefer to wait for a downside move and re-evaluate our current long positioning on the currency pair.

 

  • Spot Gold

A bullish reversal from support at $1810/oz led to a rally towards $1860/oz before the momentum of the move subsided.

Given the lack of directional momentum in dollar gold, we continue to favor a neutral positioning for this commodity and wait for a more likely setup.

Key levels where we would consider new trading opportunities are at $1890/$ or $1780/$. At these outer extremes, we will look for bullish reversals or breakouts.

 

  • Brent Crude Oil

Last week’s bullish reversal failed, instead the price of Brent Crude fell below lateral support at 11400.

The signals are somewhat ambiguous at the moment, as the break of support was followed by a new bullish reversal (circled in blue) and an overbought signal from our stochastic oscillator.

The longer-term trend remains upward as the price remains firmly above the 200-day simple moving average (blue line).

We are waiting for a close above resistance (previously support) at 11400 to confirm the bullish reversal before assuming a near-term continuation of the longer-term uptrend. In this scenario, 12340 becomes our initial upside resistance target, while a close below the reversal low at 10970 could be used as a stop loss indication for the trade.

 

  • Impala Platinum vs. Newgold Platinum Issuer

The pair considers a long position in Impala versus a short position in NewGold Platinum. The net result of these combined trades provides for a profit margin of 17%. A stop loss is considered equal to the expected profit.

A successful pair trade can be realized in 1 of 3 ways:

The long position goes up while the short position goes down.

The long position rises faster than the short position rises

The short position falls faster than the long position falls.

The blue line on the chart represents the Impala/NewGold-Platinum ratio, which recently traded more than 2 standard deviations below the mean (middle line). For a successful trade, the ratio (blue line) would have to revert to the mean in order to reach the given profit target of 17%.