Technical analysis: Aspen rally causes break-out

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A recent rally in pharmaceutical company Aspen has caused a break-out of a large chart pattern, pointing to a significantly higher target over the medium term, as shown here.

Aspen: Higher target

Broad recommendation: Buy on a pullback

Trend: Up on all main time frames.

Strategy: Buy on a pullback to the R301 level.

(Daily)

- Aspen has reached a short-term profit target from a broadening formation (lines 2 and 3).

In the process it has broken out decisively above line 1, which confirms a much larger bullish pattern, called an inverse head and shoulders continuation pattern (labelled in red).

- In the immediate short term, its short-term stochastic (on top) is overbought, so a minor pullback is to be expected before more upside.

- Look to buy (or re-enter) on a minor pullback to the R301 level.

- The new target (medium term) is R344 based on the head and shoulders continuation pattern. Short-term support is line 1 at R295.

- Initial stop-loss is a close below R294 when buying on a pullback. From R320 bring your stop up to break-even (your entry).

* Colin Abrams is an independent technical analyst. To subscribe to his weekly research or attend his courses, please got to www.themarket.co.za


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