A rocking trade – Vodacom

We have a new contributor to Finweek in the form of Moxima Gama – a technical analyst who runs The Money Hub. She is one of the most highly regarded technical analysts in the country and provides a lot of support to major banking groups.

She kicked off her input to Finweek with a “buy” recommendation on Vodacom. Check out her thoughts below:

 

 

 

 

 

Pattern

Strategy

Current price

Entry (close)

Stop loss (8%)

Target

Potential gain

Falling-wedge

Buy

11,327

11,895

10,940

14,850

25%


Pattern formation: A falling-wedge is a continuation pattern. Once a positive breakout is confirmed — by trading through the upper slope of the pattern — the bull trend would resume.

Possible outcome: Resistance encountered at R130 triggered a gradual pull-back — resulting in a falling-wedge pattern. This pattern remains intact. However, due to the extremely oversold RSI, we expect VOD to breach the upper slope soon. A positive breakout would only be confirmed above R118.95, with potential gains to the R148 targeted mark. We would expect this objective to be fulfilled in the short term (1-3 months).

Recommendation: Go long at a close above R118.95cps, with an 8% stop loss from the entry price. In addition, we recommend a neutral long position as VOD has pulled back against its peers and relative indices. Once the relative charts revert, we would suggest investors increase their long positions from neutral to aggressive (double your position).

A failed pattern: Breaching the R112.25 support level would prolong current downside. The falling-wedge pattern would be negated below R108, and another sell-off could be triggered.

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