Technical analysis: Banks index is on the move after break-outComment on this story
Johannesburg - A break-out in the JSE banks index recently is pointing to a higher target for this index still to come, based on its price chart as shown.
JSE banks index: Higher target.
Recommendation: Traders buy banks on pullbacks.
Trend: Up on all main timeframes, but overbought in the short term.
- The banks index has broken sharply higher above line 2 of a medium-term broadening formation (lines 1 and 2). It has a higher target in place.
- Its short-term stochastic oscillator (on top) is overbought so a minor correction is possible before further upside.
- Traders buy large-cap banks on a pullback in this index closer to 59 200. (At the time of writing this index was at 61 280). Line 3 support is currently at the 58 600 level.
- The minimum upside target is 65 250, measured as the height of the broadening formation projected up.
- The initial stop-loss for traders will be a close below 58 400 (as a guide for bank stocks in general). Once this index gets to 64 000 start taking partial profits on your bank stocks, and raise the stop on short-term holdings, for example, to a breaking of prior one-day lows.
* Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author, or attend his courses, please go to www.themarket.co.za