Buy on the down­turn

Use pull­back be­fore shares re­cover

Finweek English Edition - - Creating wealth - COLIN ABRAMS

THE JSE IS FI­NALLY SHOW­ING a lon­gawaited cor­rec­tion, and the ques­tion is how far the mar­ket will pull back, ie how se­ri­ous will this pull­back be? We try to an­swer this ques­tion by look­ing at a chart of the JSE top 40 in­dex. We also look at the chart of the JSE Fi­nan­cial (“fini”) 15 in­dex (the 15 largest fi­nan­cial stocks on the JSE), to see what it’s in­di­cat­ing for fini stocks in the short term.

The charts show both the top and fini 15 in­dices head­ing rapidly to medium-term sup­port. A break­down be­low there is likely with more short-term weak­ness to fol­low. How­ever, the long-term trend of the mar­ket re­mains up, and a cor­rec­tion will pro­vide a good op­por­tu­nity to buy stocks at cheaper prices.

Please note: For more rec­om­men­da­tions and charts by the au­thor on shares, stock in­dices, and com­modi­ties, please go to www. the­mar­ket.co.za.

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