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Technical analysis: MTN breaks out

Published Aug 7, 2012

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Colin Abrams

After moving sideways for almost 18 months, MTN has given an upside breakout. This is positive news for the future.

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MTN: Bullish breakout

Broad recommendation: Buy a pullback

Trend: Short and medium term up. Long term flat to up.

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Strategy: Buy on a pullback to R151.

(Weekly)

n MTN recently broke out of a long, sideways channel (lines 1 and 2). The principle is, the longer the consolidation pattern, the larger will be the ensuing breakout move. Therefore, the current breakout augurs well going forward.

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n The weekly stochastic oscillator (on top) is overbought, which is the only immediate concern. Any pullback or correction will be temporary.

n Due to the price being overbought at present, wait for a pullback to R151 to buy. Note, line 2 resistance is at R147.

n Minimum upside target is R169, measured as the height of the channel projected up. As this channel is so large, expect that target to be comfortably exceeded over time. A further target is R198.

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n The initial stop loss when buying on the pullback is a weekly (that is, Friday) close below R144. Once it nears R167, take partial profits and raise your stop loss to protect profits.

Colin Abrams, 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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