Pinnacle Holdings is one of the JSE’s former high flyers, but it collapsed earlier this year on news of potential fraud by one of its directors. Since then the stock has shown signs of bottoming and is building up for a potential rebound.
Pinnacle: Bullish pattern forming.
Recommendation: Buy on a break-out.
Strategy: Buy on a close above line 1.
- After a meltdown in March, Pinnacle has stabilised in recent months and has been forming a distinct base. This is now taking on the look of a large inverse head and shoulders pattern (as labelled). It needs to close above line 1 (the neckline) to confirm this pattern. It is currently forming the potential right shoulder.
- The short-term stochastic oscillator (on top) is oversold, so a rally above line 1 can occur any time.
- Buy it on a closing price above line 1, or R13.65. (It closed at R13.10 on Friday.)
- Once that break-out occurs, the minimum upside target will be a R17.90/R18, based on the height of the inverse head and shoulders projected up.
- Once it breaks out, place your initial stop-loss as a close below R12.50.
* Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author or to attend his courses, please go to www.themarket.co.za.