south Africa’s big four banks – FirstRand, Standard Bank, Barclays Africa and Nedbank – have shown surprising resilience despite the tough economic environment, even testing prior highs on their charts that were last tested in 2015.
However, FirstRand’s Group CEO Johan Burger says the state of the economy has left banks with little room to extend credit, a situation that is expected to continue for the next two to three years. Earnings growth has been boosted by cost containment and lower impairments, rather than revenue growth, Bloomberg reported.
On the chart:
Though the uptrend was choppy, FirstRand has managed to recover its 2015 losses by retesting its all-time high at 5 850c/share in August. Currently pulling back from a mega-overbought position, FirstRand would have to retain its current uptrend to overcome the 5 850c/share mark.
How to trade it:
Go long: Support retained above 4 930c/share – thereby forming another rising bottom – would increase the chances of FirstRand breaching its alltime high at 5 850c/share and commencing a steeper new bull phase. Another buying signal would be triggered above that level, with medium term upside potential to 7 895c/share.
Go short: FirstRand could fail to breach its all-time high and retrace instead – signalled below 4 930c/share. Downside to either the support trendline of its primary bull trend or to the prior low of 3 660c/share could follow. In which case, go short below 4 930c/share and increase positions below 4 325c/share. ■