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Technical chart: Trend for financial index is expected to be down

Colin Abrams

Despite a relief rally at the end of last week, the JSE financial 15 index (Fini) continues to look vulnerable and has a lower target in place, as shown on its chart alongside.

JSE financial 15 index: Lower target.

Recommendation: Sell short rallies.

Trend: Short term down. Medium term turning down.

(Daily)

n The Fini 15 index has formed a medium-term double top (as labelled). It recently broke below line 2 to confirm this pattern. It remains vulnerable despite finding support at, and rallying off, line 1 last week.

n Its daily stochastic (on top) is in its oversold region, so some more relief rallying is likely before it heads back down.

n Sell short large-cap financial stocks on a minor bounce to the 12 200 level, and on a reversal back down from there. (At the time of writing this index was at 11 971.)

n The minimum downside target is 10 850, measured as the height of the double top projected down. We will re-assess from there, but 10 300 would be the level thereafter and is certainly achievable before the rout is over.

n Your initial stop will be a close above 12 500. Once the index trades below 11 000, lower your stop a lot.

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.

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