Ready to run

Finweek English Edition - - Marketplace Killer Trade - Go long:

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. ■

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