Killer Trade

Could Sa­sol be fu­elling yet an­other bull leg?

Finweek English Edition - - INVESTMENT - BY MOXIMA GAMA moxima@the­money­

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.

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