Could Sasol be fuelling yet another bull leg?
According to its monthly chart, Sasol has the potential to appreciate further to a 78 000c/share targeted level within a year. Sasol is the world’s largest producer of petroleum from coal. Because many avant-garde investors believe that natural oil production will steadily decline as reserves run out while global demand increases, Sasol’s coal-to-liquid and gas-to-liquid technologies are becoming increasingly attractive.
As a double-hedge stock, a weaker rand and higher oil prices increase earnings for the company. Since I expect the rand to gradually head towards its 2001 low at R13.81 to the dollar within the next two years and see Brent Crude Oil positively breaking out of its long consolidation pattern towards its previous $130/per barrel level, I expect Sasol to remain bullish in the medium term – encouraged by its continued global expansion that will provide a positive outlook for sustainable profitability. POSSIBLE SCENARIO: Sasol has retraced with the recently plummeting Brent Crude Oil price, which is now extremely oversold. With the rand consolidating within a tight range, it comes as no surprise that a falling-wedge pattern is forming on the Sasol daily chart. Upside above 63 400c/share would confirm a positive breakout, and therefore restore upside impetus towards the 70 700c/share objective – thereby placing Sasol closer to its medium-term target at 78 000c/ share (from a pattern breakout on the monthly chart).
ALTERNATIVE SCENARIO: Breaching the lower slope would negate the pattern and trigger a steeper bear trend towards the 58 010c/share support mark. A negative break out of the current uptrend would be confirmed below that level – any pullback would still make a good buying opportunity.