Ready to run
since its founding in 1992 as a medical aid provider, Discovery has grown into a R96bn financial services firm with operations around the world. It currently controls more than half of South Africa’s medical aid market, and has used its innovative rewards programme Vitality, which incentivises healthy behaviour, to offer disruptive insurance and financial product offerings.
The group has the ability to raise funds for investments with ease. It has been investing in expanding its Vitality network globally, as well as its financial services offerings, including the establishment of a banking operation in SA.
On the charts:
After peaking at 15 580c/share, Discovery corrected from an overextended position. Now that it has broken out of bearish territory and is reclaiming its losses, it has legs to run further and form new highs. I had recommended a long above 13 200c/share in February, with a 100% retracement to 15 580c/share.
How to trade it:
Discovery is approaching its all-time high at 15 580c/ share and could hesitate to break above that level at first. If upside momentum decelerates at that level, but holds above 14 425c/ share, then an upward break through 15 580c/share would be possible – go long or increase positions above that level.
The medium-term target after the triangle consolidation is at 21 885c/share.
Go short: If Discovery falls through 14 425c/share after retesting its all-time high at 15 580c/share, go short. A double top could form on continued downside through 13 170c/share. The trough of the pattern would be at 10 790c/share, with the downside target situated at 6 865c/share. ■