ALSI – LONG-ONG-TERM BREAK­OUT

Finweek English Edition - - Creating wealth -

Trend: Long term up. ( But short term over­bought.) Strat­egy: Long- term in­vestors con­tinue buy­ing lo­cal stocks on cor­rec­tions. • This chart of the JSE all- share in­dex goes back to 1987 ( ie 20 years) and shows the in­dex trad­ing in a long- term ris­ing chan­nel ( lines 1 and 2). How­ever, that was un­til Nov/ Dec 2006, when the price broke out above line 2 re­sis­tance of this large chan­nel. This lit­tle- no­ticed event has great sig­nif­i­cance. It sets the tone for the price to con­tinue ris­ing steadily in the years ahead. This break­out above line 2 now sets up a large up­side tar­get of 43 300 on the all- share in­dex ( to be reached over the longer term). This is ap­prox­i­mately 70% above cur­rent lev­els. There­fore, long- term in­vestors should con­tinue buy­ing large- cap JSE shares on cor­rec­tions. There will be some steep cor­rec­tions along the way. The JSE is cur­rently over­bought in the short term. Im­por­tant sup­port is line 3 at 23 500, but this level looks very safe for now.

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