An interesting development is taking place in several JSE construction stocks. One example is the chart of Group Five, which has finally broken its five-year bear trend. It now has two higher targets in place.
Recommendation: Buy or accumulate on pullbacks.
Trend: Short and medium term up. Long term technically sideways.
n Group Five has broken out of two significant chart patterns. The first is a large falling wedge (lines 1 and 2). The second is a double-bottom pattern (as labelled).
Each pattern has a higher target. Target 1 is to R48.50 (based on the double bottom). Meanwhile, target 2 is slightly higher at R52 (based on the large wedge). The price at the time of writing was R35.50.
n Therefore, there is still good upside potential here over the medium and longer term.
n In the short term, the price is overbought. But any pullback will be temporary.
n Medium-term players should start buying now. And use any pullback to line 3 (R31.95) or lower to add to medium-term holdings.
n The medium-term stop loss should be kept relatively wide for now as a weekly closing price below R26.
Colin Abrams is an independent technical analyst. To subscribe to more recommendations, or attend courses, see www.themarket.co.za.